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Apple market share in China is growing

iphone-5-thumbApple is reportedly making continuous progress in China in terms of sales figures. The Cupertino-based tech company has seen steady growth in the world’s biggest market for the past few years.  After 2011 ended, Apple’s market share in China, based on numbers of users running iOS, was at 7.5 percent. The figure grew to 12 percent after 2012 ended. As Apple is preparing to launch iPhone 5 in China, which the company said sold about 2 million units during the weekend launch, the figure is expected to rise further. Apple smartphones are currently being distributed by few carrier partners in the country, but not by the largest one, China Mobile. The American company had managed to broker a deal with China Telecom this year though. The key to Apple’s success in China is a successful partnership with the world’s largest wireless network operator, China Mobile. Apple Chief Tim Cook was in China earlier this month in a meeting with executives from China Mobile in another attempt to iron out more financial details to close a deal. One of the major stumbling blocks for both companies is the special 3G network China Mobile is using in the country. Other phone makers supplying their hardware to the carrier like Nokia were forced to modify their high-end phones so they would over the network. China Mobile is boasting a 703-million subscriber figure, which means that securing even a small percentage of that can be a profitable business.

The Chinese carrier just released its best ever monthly report showing a strong 3G subscriber growth figure, even without selling the iPhone 5. China Mobile announced that it added 5.5 million 3G subscribers last December, well above its month to month average of 3 million for the past months. The huge number can partially be attributed to the shift of users from 2G to 3G, as China Mobile’s 2G base declined by an estimated 2.5 million during the same month. The surprising trend however, is not true to China Telecom and China Unicom, as both only added a little more than 3 million 3G subscribers during the same period. Apple’s iPhones 5 are being distributed by both China Unicom and China Telecom.

It is surprising that China Mobile’s very impressive growth figure happens at the same time when the iPhone 5 release in China is being carried by its two rivals. If this trend will continue over the next few months, the situation will easily give an advantageous position to China Mobile as it tries to work on subsidy negotiations with Apple.

Analysts think that it is not a coincidence that China Mobile posted a record surge in number of 3G subscribers on the same month that Apple launched the iPhone 5.  It is believed that  many of China Mobile subscribers, anticipating a deal with the carrier and Apple, decided to switch over to Lumia Windows Phone and Android after realizing that a deal was not happening.

Everyone agrees that demand for iPhones is huge following Apple’s report of a 2-million unit sales figure during the opening weekend last month. Those customers who chose to rival smartphones because China Mobile and Apple were not able to close a deal were clearly lost opportunity for Apple. The situation is expected to put added pressure on Apple’s part to reach a deal soon with China Mobile.

Apple needs to capture consumer interests in emerging markets like China if it wants to remain dominant in the next few years.  The smartphone market in developed countries like the United States is getting more saturated at a time when there are concerns that iPhone innovation is thought to be fading. The Chinese smartphone market is growing at a very fast rate and is projected to overtake the United States as the largest smartphone market in terms of volume this year. The projection shows a critical statistic for hardware vendors like Apple because this only involves 20 percent of subscribers who have access to 3G network. A very huge majority of Chinese subscribers are yet to upgrade from 2G to 3G, a huge potential for Apple looking for greener pastures.

Android operating system still controls an immense 86 percent of the market share last December. It is known that the version of operating system used in China is different than the rest  in the world due to China government’s control of the Internet in the country. Chinese phones running Android operating system do not have Google applications like YouTube, Gmail, and Google Maps. If Apple can continue its growth momentum, it can slowly chip away the large gap between the two operating systems in the country. There will be 10,000 more new stores that will open in the country this year that will be selling iPhone 5s. The number already includes additional new Apple Stores and 400 new premium resellers. Tim Cook said during the fourth quarter that the company’s sales doubled in the country. Analysts also believe that an additional 40 million iPhone units will be sold in Asia-Pacific market this year.

Together, Android and iOS dominate the market in China at 98 percent after the fourth quarter, an increase from 79 percent in 2011. Total smartphone shipments in 2012 rose by 64 percent translating to 53 million units during the last quarter of 2012 alone.

source: forbes

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