China Mobile deal crucial for Apple

Rethink
It was noticeable that all the media furor about the Apple/Samsung verdict was not echoed in China, where newspapers scarcely reported on the event.
 
This is partly because there are, for now at least, no Chinese vendors embroiled with Apple's lawyers, and also because the iPhone, despite some success, does not hold the same sway in the world's largest smartphone market as elsewhere. Indeed, the size and distinctive consumer habits of China present Apple's biggest mobile challenge to date.
 
That is for two reasons – it is losing share in China's own market, and will come under threat everywhere from ZTE, Huawei and Lenovo as those Chinese firms start to make a global impact in handsets at last. ZTE is now the fourth largest cellphone maker in the world, according to Gartner, trailing Samsung, Nokia and Apple, and has a target to double its smart-phone sales this year.
 
Huawei is now in sixth place after LG while another Chinese player, TCL (which uses the Alcatel brand internationally), is in seventh (the top ten is completed by HTC, Motorola and RIM, according to Gartner, though the rankings would be different in a smartphone specific league).
 
In China itself, the iPhone's sales are dwarfed by those of midrange, locally tailored models from firms like Yulong, a top three player at home, which is just launching into international waters - it announced a low cost LTE Android handset for MetroPCS this week, priced at $149 (€119). This is not Apple's target market of course, but it does raise questions over where the iPhone will find growth in future. In China, Apple is in seventh place in smartphones, partly because it does not support the 3G technology of the largest operator, China Mobile, which has 650 million connections.
 
In a recent research note, Kevin Wang of IHS wrote: “Among all the international smartphone brands competing in China, Apple is the only one not offering a product that complies with the domestic TD-SCDMA air standard. For Apple, this is a huge disadvantage, as TD-SCDMA represents the fastest growing major air standard for smartphones in China, with shipments of compliant phones expected to rise by a factor of ten from 2011 to 2016.”
 
 
Such comments have aroused speculation that Apple will create a TD-SCDMA iPhone, though it is more likely to wait for TD-LTE to win the China Mobile prize, helping that cellco in its ambitious plans to move quickly to 4G. But it does need to do something to improve its fortunes in this huge market, and in the medium term that will make a deal with China Mobile essential.
 
In the second quarter, according to IDC, Apple's smartphone share in the country almost halved, losing out to ZTE and Lenovo. Its share fell to 10% in a high growth segment, from 19% in the year-ago quarter, although much of the slippage could be down to consumers waiting for the next iPhone.
 
However, that was a factor in mid-2011 too, with the 4GS still over the horizon, and Apple's one-phone strategy once again comes into question as rivals like Samsung hurl multiple handsets at the huge territory. Samsung, by IDC’s reckoning, led the Chinese smart-phone sector with 19% share, followed by Lenovo on 11%, ZTE and Apple on 10%, and Huawei on 9%.

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