Apple Is Looking To Expand Its Chinese Reach as Samsung and HTC Face Loss



Apple has a long history of seeking contracts with Chinese networks to expand its reach on the Chinese market. Since 2007, Apple has been sending delegations to negotiate with the China’s most powerful mobile network China Mobile. China Mobile is not only the Chinese largest mobile network; it is also the world’s largest mobile carrier. Apple is looking to nail down a big contract while some of its competitors face harsh competition where they used to be the leaders. Apple – China Mobile has been reported as imminent by the Wall Street Journal on December 5, 2013. We still have no confirmation whether the deal has been signed, and the terms are still to be disclosed. For example, we still do not know the price that Chinese consumers will have to pay for iPhones. However, once the deal with China Mobile is signed, Apple is expecting to double iPhone sales on the Chinese market. That’s double as fast as the overall growth of smartphone market in China, and that would take a large chunk of market share from the two main Asian competitors, Samsung and HTC.

It has taken Apple and China Mobile more than 5 years to reach this stage in negotiation where the signing of the deal is close. The late Steve Jobs initiated the negotiation process in 2007; however the Chinese market differs a lot from the technology market in other countries. If Apple is used to dictating conditions to network carriers, China Mobile is the one imposing their conditions on the deal. CEO of China Mobile Li Yue said Apple must discuss “the business model and benefit sharing.” Apple may have to meet some of the China Mobile requirements to close the deal.

Edward Zabitsky, of ACI – Research, a Toronto-based company, says, “in this relationship, China mobile has all of the power…. China mobile will offer the iPhone as soon as Apple gives in on price.” Offering affordable devices to its subscribers is critical for China Mobile, which has the largest database of subscribers in China, most of which are millions of poor rural population, said Janice Chong, an equity analyst with Standard and Poor’s in Singapore. “Proliferation of sub-1000 Yuan smartphones has been driving much of the 3G momentum in the past year,” she said.

It is exactly this strategy of China Mobile to be able to cater to the low-end market gave way to national brands like Lenovo, ZTE and Huawei. However, China Mobile has lost some 5% of its market share in the past few years and now the company needs to expand its reach to the high-end market more than ever, so this is the right moment for Apple to take action. “China Mobile’s size and Apple’s recent slowdown in growth position the operator well in any negotiations,” said Walter Piecyk, an analyst with BTIG LLC in New York. “The iPhone is a difficult product for any wireless operator to ignore.”

China Mobile will have to subsidize part of the costs to attract subscribers to buy expensive iPhones.


The deal with China Mobile will give Apple access to the subscriber database that is seven times as big as the database of Verizon wireless, the largest carrier of the United States. After the United States and Europe, China is the greatest market for Apple in terms of revenue. China Mobile has almost 800 million subscribers; however, the greatest part of them cannot afford to buy iPhones.

The great thing about the Chinese market is a small slice of the pie translates into pretty significant sales,” says Ken Hyers, an analyst at Strategy Analytics. An analyst Benedict Evans said in his Tweeter: “the iPhone is so expensive that only a couple of hundred million Chinese people can afford it.”

Analysts estimate that at least 10% of China mobile subscribers will be able to afford iPhones.

Samsung s4_note3


Samsung is the largest smartphone manufacturer in China, with more than 20% of the market share. Compare it with Apple’s 6% share on the Chinese market. However, Samsung is facing some hard times as its worldwide shipments of Galaxy S4 did not meet expectations. Samsung shares dropped more than 20% in summer, but Samsung still holds the leadership in China, winning the battle for high-end buyers with Galaxy S4 and Galaxy Note 3. However, the potential deal of Apple and China Mobile will flood the market with Apple’s newest 5S and 5C iPhones which outsell Samsung’s smartphones in other markets, including United States and India.



HTC has lost more than 90% of its market share since 2011 both worldwide and in China. The company is targeting the high-end of the Chinese market, same as Apple, so the competition is going to be tough for HTC.

If China Mobile subsidizes iPhone purchasers for its subscribers, Apple will reach deeply into the Chinese market.

Apple is not in the junk market

However, Apple is not expected to significantly lower price for iPhones to compete with the down-market Android phones that sell under $100 without Google services.

There is always a large junk part of the market,” said Tim Cook, Apple’s CEO, about the low price Android smartphones that flooded the Chinese market as well as other markets worldwide. “We’re not in the junk business.”

Apple’s target is the high-end and the middle market, same as Samsung’s and HTC’s, so we have yet to see the tech giants compete for Asian markets.