Apple faces battle to win over China with pricey iPhones
Its China rivals match its features, beat its prices, dwarf its market share
The signature features of Apple Inc.’s new iPhones—bigger screens and dual-SIM support— speak directly to demands in the all-important China market.
Chinese rivals already offer similar features for less money, however. That means the improvements may help Apple retain its market share in China, but may not be able to win new converts to Apple’s ecosystem— and that could keep sales flat, analysts say.
“It’s still hard for Apple to attract wider Chinese consumers from Android users,” said Mo Jia, a Shanghai-based analyst at market-research firm Canalys, citing “the extremely high price band compared to local high-end Android products.”
The Apple iPhone launch also drew criticism on Chinese social media Thursday. During the launch announcement at Apple headquarters in Cupertino, Calif., a day earlier, an image of global release dates projected on stage included Taiwan and its flag as distinct from China.
Taiwan has an independent government, but China claims the island as its own and has previously pushed airlines, hotelier Marriott International Inc. and other companies to change online references that suggest Taiwan isn’t part of China.
“Apple, what did you mean at the launch event?” the Communist Youth League posted on its Weibo social media account. The Communist Party tabloid Global Times reported online that Chinese netizens are urging Apple to follow the one-China principle.
Apple didn’t immediately reply to a request for comment.
The starting price of the new phones by Apple will range from about $950 and $1,400 in China, while a handset produced by rival Huawei Technologies Co. with a dual-SIM-card feature and similar screen size can be found for about $660.
After back-to-back years of steep sales declines, Apple’s China business has bounced back recently, helping the company hit record profits. Revenue in the region has risen 16% to $40.53 billion in the three fiscal
quarters ended in June. Greater China accounts for about a fifth of its total revenue.
Yet its market share in China has been treading water. Once the top seller in China, Apple is now the fifth best-selling brand with a 6% market share in AprilJune, down 1 percentage point from a year earlier, data from Canalys showed.
To be sure, that may not matter for Apple’s profitability. As the global smartphone market contracts, Apple’s focus has shifted from units it ships to higher profit margins. Just maintaining a similar shipment scale could help drive Apple’s profitability again, Mr. Jia of Canalys said.
While Apple remains a status symbol in China, it has been trailing homegrown rivals Huawei, BBK Electronics Corp.’s Oppo and Vivo brands, and Xiaomi Corp.
In an effort to revive its fortunes in the region, Apple offered software updates tailored toward China including the addition of voice dictation in the Shanghai dialect and support for
QR codes, used widely for mobile payments. It last year also named its first executive with oversight of the China business.
With the latest models, Apple took a further step with a Chinaspecific hardware update, willing to stomach extra costs with modifications to the dual-SIM-card feature it is adding to the new handsets.
An acronym for subscriber identity module, SIMs are microchips that allow smartphone users to access a wireless network. With dual SIM, users can use two phone numbers on one device.
Outside of China, the new iPhones feature a technology that blends a physical SIM with an eSIM technology, a digital embedded SIM that lets wireless subscribers store a second phone number on the device without a second physical SIM card.
But in China, that is a challenge because of regulations that require carriers and regulators to be able to track the device user’s identity. That would be difficult to do with eSIM, which would be embedded by Apple and
not the carriers. Therefore, Apple has added trays for those physical SIM cards in China alone, further complicating a difficult supply chain by requiring additional components and different production processes.
China is the world’s biggest market for dual-SIM smartphones, according to Canalys. The feature is popular among users with two numbers for business and private use, or those who use one SIM card for phone calls and another for internet access. It’s also a benefit for international travel. More than 62 million Chinese vacationed in other countries last year, twice as many as five years earlier.
The dual-SIM feature is attractive for Chinese consumers, but nothing new, analysts say. In April-June, only 6.6% of smartphones sold in China had one
SIM card, said Canalys’s Mr. Jia.
Along with dual-SIM slots, Apple on Wednesday introduced two new models with its largest iPhone screens ever: a 6.5-inch display called iPhone XS Max using advanced, OLED technology and a lower priced device with a 6.1-inch LCD display, called iPhone XR. It also unveiled a 5.8-inch OLED screen version, called the iPhone XS.
The new iPhones’ bigger screens will meet the taste of Chinese consumers who are highly reliant on smartphones to go online to shop, pay for goods, hail cabs, play games or watch popular live video streaming. In China, 788 million people, or 98% of internet users, go online using mobile phones, according to the China Internet Network Information Center, a government-affiliated agency.
Yet Chinese competitors have already offered phones with displays larger than 6 inches. Huawei’s recently unveiled Honor 8X Max’s display size is 7.12 inches.
Chinese consumers tend to especially value new looks of products and could be turned off by Apple’s new models that look similar to the previous version, said James Yan, an analyst at Counterpoint Research based in Beijing.
In China, the iPhone XS Max starts at 9,599 yuan, or about $1,400, while the iPhone XR starts at 6,499 yuan, or about $950— higher than the U.S. price tags of $1,099 and $749 respectively, partly due to tariffs.
By comparison, one of Huawei’s current high-end models, the P20 Pro, starts at 4,488 yuan, or about $660. The company is set to unveil its latest products next month.
On Chinese social media, the cost of the new iPhones was one of the main discussion points.
“We are all talking about the high price,” said a user with the name of Kena Shazhou on the microblog Weibo. “However this may actually suit the vanity of some Chinese people.” Another commented: “Even the lowest price is enough for two good Android phones.”
Apple assembles most of its iPhones in China. While smartphones have so far evaded U.S. tariffs, Apple has said its watch, wireless headphones and other goods would be hit by proposed U.S. tariffs on $200 billion of Chinese goods.