Apple's iPhone in China: CanApple Cash in on the World's BiggestMobileMarket?

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Themes: Strategy
Pub Date : 2009
Countries : India
Industry : Telecommunications

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Secondly and most importantly, Apple is challenged by the presence of huge grey market in China. Few experts opine that the unofficial entry of iPhones in China will hamper the demand for Apple iPhones while few opine that Apple can actually bank upon its grey market presence in China. According to Z. John Zhang, professor of Marketing at Wharton, "Without any marketing inside China, Apple has managed to sell a large number of iPhones through the grey market. Apple could actually use the grey market to its advantage by capitalising on the iPhone's existing popularity. They can say, 'We know you love the product'. That's not something they could do when they initially launched the product (in the US)."³⁴

Thirdly, Apple handsets in China are released into the market without Wi-Fi function, which could be a major setback for the company. As illegitimate handsets are already offering several enhanced features and users are showing more inclination towards mobile phone internet access, disabled Wi- Fi feature can hinder Apple iPhone's demand. However, after the first batch of Apple iPhones entered into Chinese mobile market, government allowed the company to include Wi-Fi function. Although this could lessen the threat of low demand for future Apple iPhones, the existing handsets still face the threat.

Adding to this, Apple also lacks a cultish image in China although a large number of image conscious buyers are present in the country. According to David Pierson of Los Angeles Times, "The company's other signature products - iPod music players and Mac computers haven't gained much traction here largely because of their premium prices."³⁵

Besides, Apple partnered with China Unicom, which is next to China Mobile in terms of subscriber base. Hence, the question arises as to how far Apple's iPhone can penetrate into Chinese mobile market. Giving his views on the same, Kartik Hosanagar, Wharton professor, Operations and Information Management stated, "In the US, Apple managed to land a deal with AT&T. In contrast, in China, Apple could not get a deal with China Mobile, which has the largest share of the market.... So an important factor is that the share of the market that Apple is getting through China Unicom is much smaller."³⁶ Meanwhile, China Mobile entered into deal with several major handset brands - Motorola, Samsung and HTC - for launching smartphones, called OPhones, which would operate on Google's Android mobile operating system. China Mobile is therefore getting ready for providing a strong competition to China Unicom and Apple iPhone.

Nevertheless, will Apple iPhone make good sales in China, surmounting the grey market? Or, will grey market become a blessing for Apple iPhone in boosting its sales? Can Apple as a late mover, compete with the incumbents in Chinese mobile handset market?

34]"The iPhone in China: Will Apple Connect with the World's Biggest Mobile Market?", op.cit.
35]"iPhone fever probably won't spread in China", op.cit.
36]"The iPhone in China: Will Apple Connect with the World's Biggest Mobile Market?", op.cit