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Apple Counts on 5G to Boost iPhone Fortunes in China


(WSJ)  Apple Inc. is playing catch-up in China with the launch of its first 5G-enabled iPhones, seeking to supercharge uneven sales in the company’s second-biggest market—where homegrown rivals dominate.


Apple’s first 5G-enabled handset is a late entry in China, where local brands have long offered a suite of 5G-ready gadgets to use on the nation’s up-and-running next generation networks. 


It launched as China’s economy is rebounding faster than the rest of the world after it contained the coronavirus pandemic, but also at a time of increasing technology nationalism among some Chinese consumers amid heightened trade tensions with the U.S.


A crucial battle for Apple is in the premium smartphone market Apple once ruled before losing ground to Huawei Technologies Co. in recent years.


On Tuesday Apple unveiled four versions of the iPhone 12 capable of connecting to ultrafast 5G networks. The new devices offer a retro design and prices roughly in line with last year’s iPhone 11, though a smaller 5.4-inch iPhone 12 Mini starts at $699 in the U.S.


At an Apple store in downtown Shanghai on Wednesday, the new iPhone wasn’t yet on display nor were any promotional posters, two days before the new device was available for preorder.


Still, some Chinese consumers said they were excited about Apple’s first 5G handset, and said they didn’t expect the trade tensions between Washington and Beijing to sway their purchase decision.


“I think the overall upgrade on image and video function is quite significant this time,” said Zhefan Shen, a 27-year-old who works for an internet company in Shanghai and has recently used Chinese-brand phones. After watching the iPhone launch event, he said he plans to buy the iPhone 12 Mini. “I am a firm fan of small screens,” he said.


The flip side of Apple’s wait to enter the 5G-handset market is pent-up demand among committed iPhone fans in the country, analysts say. Wedbush Securities estimates about 20% of iPhone upgrades will come from China over the next year.


“We’ll definitely see a boost” in iPhone sales following the launch, said Duncan Clark, chairman of investment adviser BDA China.


Homegrown rivals have been chipping away at Apple’s market share in China for years, though the launch of its second-generation iPhone SE gave shipments a 14.1% lift during the first half of the year, according to market tracker Canalys, as the broader smartphone market in China contracted.


Apple’s revenue in its Greater China region fell 3.1% in the first half of the year to $18.8 billion, while its overall revenue rose 5.5% in the same period.


A worrisome trend for Apple is its shrinking share of China’s market for high-end handsets. In 2017, Apple dominated the premium $600-and-up smartphone market with an 86% share, versus Huawei’s 5%, according to Canalys. But in the first half of 2020, Huawei controlled almost half the market, while Apple had fallen to 42%.


“In China’s premium market, there are only two vendors: Apple and Huawei,” said Mo Jia, an analyst at Canalys.


Huawei is set to launch its latest flagship device, the Mate 40, later this month, likely further juicing sales in the short term, though the effect could fade as U.S. tech restrictions bite.


Apple faces a challenge in the deepening trade tensions between the U.S. and China. Washington has added dozens of Chinese companies, including Huawei, to its export blacklist. 


More recently, the Trump administration has cracked down on popular Chinese apps, including Tencent Holdings Ltd. ’s WeChat and ByteDance Ltd.’s TikTok. Beijing is threatening to release its own “unreliable entity” list to punish U.S. tech firms in response.


Allegra Li, a 28-year-old freelance translator and a loyal Apple fan in the central city of Changsha, said many of her friends have switched to Huawei phones amid the tensions.


“Although some of them liked Apple very much before, they now try to use Huawei as much as possible,” she said.


For Mr. Shen, the tech skirmish between the two countries is irrelevant.


“As an ordinary consumer, even if I buy one less Apple device, this will not have any impact on the bigger picture,” he said. “I just want to use a product happily.”


Apple’s roots in China, however, run deep. It relies heavily on China’s huge electronics factories to churn out iPhones and other gadgets. Apple curates its app store in China to stay on Beijing’s good side, a practice that has riled some free-speech activists but that analysts said have helped it survive in a country from which other U.S. tech giants have retreated.


“It’s such a resistant company to geopolitical shifts,” Mr. Clark of BDA China said concerning Apple. “If they come down, or they are taken down [in China], then it’s a sign that U.S.-China relations have really broken down.”


Apple continues to have a stable of loyal fans in China who will reliably flock to the new iPhone now that it is 5G enabled and comes at an accessible price point, said Neil Shah, analyst at Counterpoint Research.


“Except for Apple, everyone has” a 5G phone on the market, Mr. Shah said. “Now that it has 5G capability, that will work heavily in Apple’s favor.”


Source: Wall Street Journal by Dan Strumpf

Apple Counts on 5G to Boost iPhone Fortunes in China Apple Counts on 5G to Boost iPhone Fortunes in China Reviewed by TechCO on 10/20/2020 Rating: 5

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