Apple's China fortunes rise, despite sagging market share

Apple reported strong growth in the Chinese market, with revenue up from iPhone sales

By , IDG News Service |  

"If you look at Q3, and how Apple's market share was less than ten percent, people will just scream and say Apple is going downhill," Wong said. "But Apple has been shipping more units than before, so it has a good performance if you look at it this way."

To further drive growth, Apple is seeking to build more stores and expand its distribution in the country. In Wednesday's earnings call, Cook said Apple increased iPhone points-of-sales in China from 7,000 to over 17,000. Already, the company has 11 Apple stores in mainland China and Hong Kong, five of which were just built last year, and more are on the way.

"What Apple is saying is clear, there is a lot of potential for China," said Nicole Peng, an analyst with research firm Canalys. "But whether the potential is available to Apple, that's another issue."

The company has saturated China's largest population centers, such as Beijing, Shanghai, Shenzhen with sellers and advertisements. But to fully expand its business, Apple needs to bring more product distribution and ads to China's numerous smaller cities, where local handset makers are dominating, she said.

Sandy Shen, an analyst with research firm Gartner, said Apple will likely refrain from selling a cheaper iPhone in order to maintain its high profit margin and brand image. But to help customers more easily afford Apple's often high-priced products, the company in January started to offer installment payment plans for eligible consumers in China.

Still, even with attractive payment plans, China's low-end handset manufacturers will continue to squeeze Apple's presence in the market, analysts added.

"Apple is going to face market share pressure, because more and more vendors are dominating the lower-end market, and the higher-end is going to shrink," Shen said. "So I think at best, Apple can maintain their single digit market share for the next few years."

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