Big news out of China as Huawei has beat out Apple as is now the third largest manufacturer of smartphones in China market. According to Reuters’ report, Apple has fell to 4th place in the Chinese smartphone race during the third quarter. Apple’s share of China’s booming smartphone market has risen sharply in the past two years, but for now the company that sells the iconic iPhone is being outpaced by nimble rivals. Apple decided not to build an iPhone that could run on China Mobile’s proprietary TD-SCDMA network, and by so doing crack open an addressable market nearly three times the size of Verizon and AT&T combined.
Apple didn’t build a TD-SCDMA iPhone version for China Mobile and China Mobile is the world’s largest cell phone carrier with over 600 million users. While other handset makers supply phones that support the various mobile standards used in China. Apple’s current partner, China Unicom, is a distant second with 192.4 million mobile subscribers. More tie up with other local telecoms service provider would help catapult Apple sales. But the main sticking point has been the terms of the agreements, which could range from revenue sharing that would allow both parties to split money from data charges to simple bulk purchases.
However, even with another partner, Apple must contend with another barrier — China’s slow uptake of 3G technology. The network technology in China is not sufficient to fully support iPhone capabilities. 10 million unofficial iPhone users in China are limited to 2G data speeds which Apple doesn’t like to see. It’s quite meaningless for Apple and China Mobile to sign an agreement based on the current TD-SCDMA network. Using the new 4G TD-LTE technology that China Mobile is developing will be more feasible. China Mobile is conducting trials on its 4G network, with a commercial launch expected to take place late next year or early 2013. Its commercial 4G rollout will be a precursor to an agreement with Apple.
Aside from not having an iPhone on their countries largest carrier, Chinese customers are echoing the rest of the world when it comes to smartphones. Apple’s smartphone market share shrank to 10.4 percent in the third quarter from 13.3 percent in the previous quarter, while Huawei increase to 11 percent from 7.3 percent. Android is winning by a lot in China, even with Google’s rocky relationship with their government. The relatively high price of iPhones is a major deterrent, giving market inroads to local rivals such as Huawei and ZTE which run on Android.
It is not that Apple’s iPhones is losing favour among Chinese consumers. The iconic products are still flying off the shelves at Apple’s five flagship stores in Shanghai and Beijing, unauthorized sellers, and even from fake Apple store. But Apple still slipped in a market that Tim Cook identified as “an area of enormous opportunity“. The problem facing Apple now seems to be timing.
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