Chinese phones outsmart Apple

Comment on this story
iol scitech may 29 softbank phone REUTERS For now, geolocation-based advertising exists only in a 'very limited way' and has yet to reach its potential, said Mary Clark, head of marketing at Syniverse.

Shanghai - In China's booming smartphone market, which is set this year to overtake the United States as the world's largest, a host of little-known local firms are primed with cheap phones to squeeze market share from US giant Apple's iPhone.

In the latest local challenge to the iPhone, Xiaomi Technology on Thursday launches the successor to its popular MiOne smartphone, which is expected to have top-end specifications exceeding those of the iPhone 4S - at around half the price.

While iPhone sales will increase in China, Apple's market share may stagnate or even dip as the market's changing demographics mean the iPhone flourishes in just a handful of wealthy Chinese cities, analysts said.

“The sweet spot of affordability in China is 800-1,500 yuan (about R1 000 to R2 000),” said Michael Clendenin, managing director of Shanghai-based consultancy RedTech Advisors. “The 'Lao Bai Xing', or man in the street, is going to go for these mid-tier phones.”

Industry researcher IDC estimates that in China last year, smartphones costing less than $200 made up 40 percent of shipments, while devices costing $700 and more accounted for 11 percent of the market.

Apple releases a single iPhone model a year at a price - around $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 appeal 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 No. 1 smartphone player in China.”

Apple ranked second in January-March smartphone shipments in China, with 17.3 percent market share, trailing Samsung Electronics' 19.2 percent, according to research firm, Gartner.

Smartphones from Xiaomi - founded only two years ago but already worth more than Blackberry maker Research in Motion , according to private market valuations - 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 $1 billion as it sold more than 3 million phones.

Mirroring Apple's annual worldwide developers conference (WWDC), where devotees would pay to listen to Steve Jobs showcasing new products, the informally-clad Lei will charge MiOne fans 199 yuan to attend the Beijing launch, with the proceeds going to charity.

Apple's market share by volume has been on a downtrend, 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, according to Gartner analyst Sandy Shen - below Google Inc's Android and Microsoft's Windows.

Apple's iPhone sales in China, its second-largest market, stumbled in April-June on inventory adjustments with the launch of the iPhone 4S. That extra inventory meant resellers didn't need to buy as many iPhones during the quarter, and the expected launch later this year of the iPhone 5, with enhanced Chinese language capabilities, also likely 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,” Shen said.

Research firms IDC and Gartner predict China's smartphone shipments could hit 140 million this year, topping those in the United States.

Growth is driven largely by smartphones made by ZTE, Lenovo Group and smaller private firms such as Xiaomi, Gionee and Meizu Technology.

Meizu phones, 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,” Shen said. - Reuters

Hungry for more scitech news? Sign up for our daily newsletter



sign up
 
 

Comment Guidelines



  1. Please read our comment guidelines.
  2. Login and register, if you haven’ t already.
  3. Write your comment in the block below and click (Post As)
  4. Has a comment offended you? Hover your mouse over the comment and wait until a small triangle appears on the right-hand side. Click triangle () and select "Flag as inappropriate". Our moderators will take action if need be.