Chinese smartphone market resists Apple
IN CHINA’s booming smartphone market, which is set this year to overtake the US as the world’s largest, a host of little-known local firms are primed with cheap phones to squeeze market share from Apple’s iPhone.
In the latest local challenge to the iPhone, Xiaomi Technology on Thursday launched the successor to its popular MiOne (MI) smartphone. The MI2’s specifications exceed those of the iPhone 4S, and it sells for less than half the price.
Smartphones from Xiaomi — founded two years ago — have proved so popular they sell out in minutes after going on sale online. The company, founded by CEO Lei Jun, said last month its first half revenue was close to $1bn as it sold more than 3-million cellphones.
Mirroring Apple’s annual worldwide developers conference, where devotees would pay to listen to Steve Jobs showcasing new products, the informally clad Mr Lei charged Xiaomi fans 199 yuan ($31.30) to attend the Beijing launch, with the proceeds going to charity. More than 1,000 people flocked to the event.
While iPhone sales will increase in China, Apple’s market share may stagnate or even dip as the changing demographics mean the iPhone flourishes in just a handful of wealthy Chinese cities, analysts said.
Industry researcher IDC estimates that in China last year, smartphones costing less than $200 made up 40% of shipments, while devices costing $700 and more accounted for 11% of the market.
"The sweet spot of affordability in China is 800 yuan to 1,500 yuan ," RedTech Advisors MD Michael Clendenin said. "The ‘Lao Bai Xing’, or man in the street, is going to go for these phones."
The MI2, which goes on sale in October at 1,999 yuan, has a quad-core processor, eight mega-pixel camera and a voice assistant similar to Apple’s Siri.
Apple releases a single iPhone model a year at a price — about $800 — equivalent to about two months pay for an urban Chinese, who make up half of China’s 1.3-billion population.
Analysts say the real growth in China is in cheaper smartphones, where a wide variety of models at different prices appeals to first time buyers.
"Apple isn’t going to rule China, simply because of the limited models they have and the price points they target," said TZ Wong, an analyst with IDC. "Based on these two factors, we do not think Apple will be the top smartphone player in China."
Apple ranked second in January to March smartphone shipments in China, with 17.3% market share, trailing Samsung Electronics’ 19.2%, according to research firm Gartner.
Apple’s market share by volume has been on a down trend, and the share of the market commanded by its iOS mobile operating system is expected to slip to third place by 2016 from second earlier this year, says Gartner analyst Sandy Shen — below Google ’s Android and Microsoft ’s Windows.
Apple’s iPhone sales in China, its second-largest market, stumbled in April to June on inventory adjustments with the launch of the iPhone 4S. That extra inventory meant resellers did not need to buy as many iPhones, and the expected launch later this year of iPhone 5, with enhanced Chinese language capabilities, also held back orders.
"Apple’s market share is pretty stable. It will be flat over the next five years. Although volume-wise it’s increasing, that’s because the total market is growing," Ms Shen said.
Research firms IDC and Gartner predict China’s smartphone shipments could hit 140-million this year, topping those in the US. Growth is driven largely by smartphones made by ZTE Corporation, Lenovo Group and smaller firms such as Xiaomi, Gionee and Meizu Technology.
Meizu cellphones, which sell in China and Hong Kong for 1,500 yuan, are feted by western technology blogs for offering high-end smartphones at bargain basement prices. Offering even cheaper models, Alibaba Group, Shanda Interactive and Baidu have all this year launched smartphones for under 1,000 yuan. Baidu’s phone, made with partners, retails at 899 yuan, while Alibaba’s waterproof smartphone, made with Haier Electronics Group, costs 999 yuan.
"For those with an iPhone or Samsung … it’s just a replacement cycle. But for many people who haven’t got their first smartphone, those are the people who will get cheap smartphones," researcher Ms Shen said.
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