Apple Inc’s share of China’s smartphone market was cut by almost half in the second quarter as consumers opted for lower-priced handsets from domestic suppliers such as Xiaomi Corp (小米).
The Cupertino, California-based company’s smartphone shipments in China fell to 5 percent of the total in the second quarter from 9 percent a year earlier, Nicole Peng, the China research director for Canalys, said in a phone interview on Friday.
That is Apple’s lowest market share since the fourth quarter of 2010, according to estimates from Canalys. Samsung Electronics Co held the top spot with an 18 percent share.
Chinese handset vendors are benefiting as carriers, such as China Unicom (Hong Kong) Ltd (中國聯通), promote low-priced smartphones like Lenovo Group Ltd’s (聯想) A66 or ZTE Corp’s (中興) V790, both priced at 499 yuan (US$82).
Beijing-based Xiaomi’s shipments surpassed the iPhone by “a small margin” and moved to sixth place from eighth place a year earlier.
“Apple is only focused on the high-end segment, and China’s smartphone market growth right now is coming from the mid to low-end,” Peng said.
“Apple doesn’t have any products in the mid to low-end and that’s where Xiaomi has been building their brand awareness,” she said.
Apple is missing out on the broadest segment of the market because it has yet to offer a device running the third-generation network of China Mobile Ltd (中國移動), the world’s largest carrier, with 740 million subscribers.
Each of the five biggest vendors in China has an agreement with China Mobile.
Apple sells the iPhone 5 on its China Web site from 5,288 yuan. Xiaomi this month will offer a handset priced at 799 yuan.
Suwon, South Korea-based Samsung led China’s smartphone market with an 18 percent share in the second quarter, followed by Lenovo Group Ltd with 12 percent, Peng said.
The rest of the top five included China Wireless Technologies Ltd’s (中國無線) Coolpad (酷派); ZTE Corp and Huawei Technologies Co (華為), according to Peng.
Apple chief executive officer Tim Cook last month met China Mobile chairman Xi Guohua (奚國華) for the second time this year in Beijing to discuss possible cooperation between the companies.
Xiaomi will double handset sales to 15 million this year, from 7.2 million handsets last year, founder and chief executive officer Lei Jun (雷軍) said in June.
At the time, Lei said he was happy with “a small and beautiful company” and not focused on overtaking Apple in market share.
Apple will introduce a cheaper version of the iPhone to lure more cost-conscious shoppers, Gene Munster, an analyst at Piper Jaffray Cos, said last month.
Cook said last month the company could win its share of price-conscious consumers by selling its older iPhone 4 model, while he did not rule out a cheaper iPhone.
While Apple still delivers a good user experience with its closely controlled ecosystem, that is no longer enough to maintain share in China, said Sandy Shen, a Gartner Inc analyst in Shanghai.
Apple’s “advantage is evaporating as competition inches in with better value for the money,” Shen said.
“If it does come up with a low-end model, that is a self-acknowledgement that Apple lacks innovation and has to compete with low-cost models in order to gain share,” she added.