Apple's rivals swoop as iPhone China sales flag

Wed Jul 25, 2012 5:47am EDT
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By Lee Chyen Yee and Melanie Lee

HONG KONG/SHANGHAI (Reuters) - Apple Inc's disappointing China sales suggest that its customers will not always wait for the next iPhone when rivals such as Samsung have plenty of flashy new models available now, analysts and resellers said on Wednesday.

China is Apple's second-largest market, and its rabid fans have been known to seek out smugglers just to get their hands on the latest gadgets before they officially go on sale in Beijing and Shanghai stores.

But an iPad 3 launch in China last week did not generate the normal buying frenzy, and lackluster April-to-June sales of the iPhone 4S have some analysts questioning whether Apple products are losing their status as the must-have accessory for China's hip and affluent.

"The (iPhone 4S) model is a little bit too long in the tooth when compared to other phones with better specs," said TZ Wong, a Beijing-based analyst from research firm IDC.

"To put it plainly, consumers are getting a little bit tired of the look of the iPhone 4 and the iPhone 4S."

Apple's sales from greater China, which includes Taiwan and Hong Kong, totaled $5.7 billion for its third quarter ended June, an unexpectedly steep drop of $2.2 billion from the January-March period.

Apple's quarterly results pressured shares of its Asian suppliers on Wednesday, with Taiwan's Hon Hai and South Korea's LG Display ending more than 4 percent lower, while Japan's Toshiba fell more than 7 percent.

Tim Cook, Apple's chief executive, told analysts that about half of the quarter-to-quarter decline stemmed from "changes in the inventory channel" rather than weak sales of its iPhone 4S, which analysts took to mean that Apple had built up excess inventory in the first three months of the year.   Continued...

Raindrops are seen in front of an Apple logo outside an Apple store in Shanghai February 22, 2012. REUTERS/Aly Song