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Apple in China: By the numbers

Jared Newman | Nov. 6, 2013
In China, Apple remains a luxury brand, not a mainstream powerhouse. And even as China becomes a bigger source of Apple revenues, it is still in many ways a country of unrealised potential and unique challenges.

All the while, China's middle class was expanding, with more disposable income to spend on Apple products. Nicole Peng, research director for China at Canalys, said that Apple was seen as a status symbol for the wealthy before, but over time the company established itself as an "affordable luxury" brand.

Apple's attention to China was beginning to have a major impact on the company's earnings. In 2009, the entire Asia Pacific region brought in just $3.18 billion. The following year, annual revenue jumped to $8.26 billon, and in 2011, Asia Pacific revenue reached $22.5 billion—a more than 600 percent increase in two years. And by the fourth quarter of 2011, roughly 70 percent of that revenue was coming from China.

Over those two explosive years, China grew from 2 percent to 12 percent of Apple's total earnings, as Chinese customers got caught up in the Apple craze. When the iPhone 4s launched in China in January 2012, it created such a frenzy that one Beijing store was forced to close, and SWAT teams had to step in to keep the peace.

Tougher times
Those days of jaw-dropping growth didn't last forever. At first, in every quarter after 2010, Apple's Asia Pacific revenue at least doubled year-over-year. But in 2012, Apple's revenues doubled only in the second quarter, when China Telecom, the country's third-largest carrier, began selling the iPhone 4s.

China sales continued to slow in 2013. In the first three quarters, China revenue was $19.7 billion—just a 15 percent increase over the previous year. Apple's biggest spike came in the first quarter, when the launch of the iPhone 5 helped boost revenues by 67.4 percent; but in the quarters that followed, earnings increased by just 7.5 percent and then fell by 13.9 percent.

Meanwhile, Apple's smartphone and tablet market share has been shrinking in China. Estimates provided to Macworld by Canalys show that with every new iPhone model through the end of 2011, Apple's market share in China spiked to increasingly higher levels, peaking at 18.9 percent with the iPhone 4s. But since then, Apple's share has tapered, and the launch of the iPhone 5 late last year brought only a 0.6 percent boost, bringing its share to 8.5 percent of China's smartphone sales. In the third quarter of 2013, Apple's share fell to 4.8 percent—its lowest level in three years. As for the iPad, IDC said in August that Apple's quarterly market share fell to 28 percent, down from about 50 percent the year before.

In Apple's third-quarter earnings call, CEO Tim Cook blamed the slower sales partly on economic factors. But a look at the competition is telling: Apple's products are being outsold by less expensive devices. Last quarter, competitors such as Samsung, Lenovo, ZTE, Yulong, and Huawei all outsold Apple in smartphones, according to estimates from Canalys. The pattern is similar to what we've seen in other parts of the world, where "good enough" phones and tablets are gobbling up Apple's market share.


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