The global launch of the iPhone 7 yesterday is crucial to Apple Inc’s fortunes in China, but both it and its biggest rival, Samsung Electronics Co, hit by a recall over exploding batteries, are struggling in the face of upstart local competitors.
The US and South Korean firms were relegated to fourth and fifth place respectively in the Asian giant’s smartphone market in the first half of this year, according to consultancy Canalys.
Ahead of them came three Chinese firms, leader Huawei Technologies Co (華為) with a 16 percent share, then two companies little known elsewhere, Vivo Communication Technology Co Ltd (維沃移動通信) and Oppo Mobile Telecommunications Corp (歐珀移動).
Photo: Bloomberg
Apple faces “a lot of challenges and pressures” in China from local manufacturers who are “developing medium to high-end handsets and offer a lot of flagship products,” Canalys China analyst Jessie Ding (丁婕) said.
The iPhone 7 — which comes with an improved camera, a water-resistant body and minus an earphone jack — “doesn’t have many innovative features,” she said, adding that its double camera function was available on a Huawei smartphone six months ago and it lacks wireless charging capabilities.
In its most recent quarterly results, Apple said Greater China dropped from second to third place among its markets in the April-to-June period — when market research firm IDC says its iPhone sales collapsed by 32 percent year-on-year.
For its part, Samsung has had to recall 2.5 million of its flagship Galaxy Note 7 handsets after faulty batteries caused some to explode during charging.
The company has handled the issue badly, said Neil Mawston of Strategy Analytics, with slow decisionmaking, poor communications and a lack of coordination, and its image risks suffering.
“Brand loyalty is not as strong in China as in other markets,” he told reporters. “It’s a very crowded, fragmented market and fiercely competitive, with rivals undercutting each other with price and design. So it’s not a market you can afford to falter in.”
Low-priced Chinese competitors have been “particularly troublesome” for Samsung, which has in the past sought to offer phones across all price ranges, he added.
Samsung has responded by trying to focus on the mid and high-end sector with improved models, which could make the recall especially damaging.
And now “the Chinese companies are producing higher-end smartphones as well — and with a large degree of success,” he said. “In the last three or four years, local Chinese brands have been on a roll, fueled by a swell of national pride in ‘brand China.’”
Chinese manufacturers’ great advantage remains price: Huawei’s P9 boasts similar capabilities to the iPhone 7, but is almost a third cheaper.
There is no official ranking of smartphone sales in China and several different consultancies put out figures.
Oppo — an unknown in the West — has experienced a meteoric rise since it launched in 2011.
According to Counterpoint Research, it became China’s No. 1 smartphone brand in June, when its market share jumped to 23 percent.
It is aiming squarely for the low end of the market.
“Oppo has adopted a simple but effective strategy, going after the offline market ... using aggressive marketing, promotions and sponsorships ... beyond tier-2 and tier-3 cities,” said Counterpoint Research director Neil Shah.
Vivo, part of BKK Electronics Corp (步步高電子), the same conglomerate that owns Oppo — employs similar methods, investing heavily in marketing to build up its brand image and on a vast distribution network that extends to China’s smaller and poorer cities and towns.
Analysts said Apple still benefits from its luxury image and the strong loyalty of its long-time users in China, but the Californian firm sometimes has to contend with the Chinese Communist Party authorities and the firm has sometimes been targeted by state-owned Chinese media on issues of customer service.
More broadly, “Samsung — and Apple — face similar challenges in China,” Mawston said.
“There are serious distribution challenges, the fact that Chinese consumers tend to favor Chinese brands, as well as Chinese-language software that links well with Chinese social networks,” he said.
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