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China's a fast-growing gold mine for Apple

Martyn Williams | May 4, 2015
So far in 2015, Apple has sold more iPhones in China than in the United States.

Those high prices mean a strong market for second-hand phones.

Electronics malls across the country do good business reconditioning or repairing used phones and selling them to customers who can't afford new ones. And Fulianwang, an e-commerce store owned by Foxconn, quickly sold out of used iPhones it sold online, saying demand was "exceptional."

Many iPhones in China are sold through the main carriers -- China Mobile, China Telecom and China Unicom -- because Apple is still just scratching the surface in China with its retail stores.

It has 19 serving 10 cities, which together account for a total urban population of about 100 million people, or roughly 13 percent of China's urban population.

Apple plans to double its retail network in the country by the middle of 2016 and is also expanding its online delivery service, so it will be able to promise two-day delivery to 365 Chinese cities, up from 319 cities today.

It's all to serve China's middle class, which is growing fast.

In 2000, just 4 percent of urban households were middle class, according to an estimate by McKinsey China, which classifies the middle class as having an annual income of 60,000 yuan to 229,000 yuan. By 2012, that had risen to 68 percent, and it is expected to hit 78 percent of urban households by 2022 with the addition of an extra 170 million people to the middle class.

"I've never seen as many people coming into the middle class as they are in China," Apple CEO Tim Cook said in a conference call with investors this week. "That's where the bulk of our sales are going."

(Additional reporting by Michael Kan in Beijing)

 

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