Analysis: Apple struggles to take bigger bite out of China

Fri Dec 16, 2011 10:59am EST
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By Lee Chyen Yee

HONG KONG (Reuters) - Apple Inc's share of China's booming smartphone market has risen sharply in the past two years, but for now the company that sells the iconic iPhone is being outpaced by nimble rivals.

It is not that Apple's iPhones and iPads are losing favour among Chinese consumers. The iconic products are flying off the shelves at Apple's five flagship stores in Shanghai and Beijing, unauthorized sellers, and even from fake shops dressed up to look eerily like the real thing.

The problem facing Apple seems to be timing.

Network technology is not sufficient to fully support iPhone and iPad capabilities, while other handset makers supply phones that support the various mobile standards used in China.

A tie up with another telecoms service provider would help catapult Apple sales. But the biggest by far, China Mobile Ltd with more than 600 million subscribers, may not have matching technology in place commercially until late 2012 or 2013.

In the absence of that, Apple's relatively rigid global pricing structure and limited range of models are allowing more flexible competitors to grab market share at a faster pace.

Apple's smartphone market share has more than doubled since the first quarter of 2010, but others are doing better. Samsung Electronics Co Ltd's market share has more than quadrupled over the same period.

"Apple's strategy in China is to capture the higher-end segment, which is a big enough market for it to tackle," said Jane Wang, an analyst at UK research firm Ovum.   Continued...