Are Apple and China incompatible?

“The Beijing Olympics begin in two weeks. But for Apple, the China games have already begun. The company opened a shiny new Apple store in Beijing Saturday — the ‘first of many’ in China, according to an Apple official. The race is on,” Mike Elgan writes for Datamation. “But is this an event Apple can win?”

“China is a coveted market. But so far, things aren’t going well. Apple has less than 8 percent market share in China for media players, and far less than 1 percent of either PC or cell phone market share,” Elgan writes. “Although Apple has successfully launched the iPhone in more than 70 countries, China isn’t one of them. The company has not yet been able to reach a deal with any Chinese carrier.”

“Apple’s second biggest hit in China, the iPhone, isn’t authorized. One Chinese analyst estimates that some 1 million Apple iPhones are currently operating on just one Chinese carrier — China Mobile — with a smaller number on other carriers. Most Apple ‘Authorized Resellers’ in China sell black-market iPhones, and many even offer illegal cracking services — a process that reportedly takes less time than activating an iPhone 3G in California,” Elgan writes.

“Apple’s struggle to sell iPhones legitimately in China is part of a larger problem: China is simply incompatible with Apple,” Elgan writes. “Here’s why.”

• Apple is a mass-market luxury brand
• China has an authoritarian government
• There is no Chinese iTunes Store
• China is number one in intellectual property theft

Elgan writes, “Yes, Apple must and will do business in China. But the company’s pristine new Apple store masks the very messy reality of a company like Apple trying to do business in a country like China.”

More in the full article, with discussion of the four bullet points listed above – recommended – here.

[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]

“The last I heard, there are 3.3 million people who own a car in Beijing. If you can afford a car, I think you can afford an iPod or a Mac.” – – Ron Johnson, Apple’s senior vice-president for retail, July 23, 2008

38 Comments

  1. Yes, “China is number one in intellectual property theft”!

    The Chinese people in general make or buy a cheep PC and install pirated Windows OS software. As long as Apple can keep their OS X of those crap PCs, the Chinese will have to buy a Mac to run OS X.

    The same will go for the iPhone. They have to keep the OS X of the other touch phones.

    At first, just the top 1% or 3 % will buy the best, so they will have to buy it from Apple. They will have to pay up for 3 to 8 years until Windows 7 can be pirated.

  2. While the 8% iPod market share is probably true (country pumpkins just dont have the money) in major cities iPods are doing well. In Shanghai metro trains I see iPods, iPhones and Sony PSPs. Some people are listening from their cell phones, it’s very rare to see mp3 players.

    There is actual iTunes store in the works with songs costing about 5 cents (very limited selection because it’s only Chinese music). Don’t ask me how they would make money, probably just covering bandwidth cost. Of course that is only a rumor, but now it seems to make more sense when you add the AppStore.

    Anyway, it would not make much difference, in China you give away the mp3 music so you can get people to come to your concerts where u can sell your CDs. Or u just sell the CD as the concert ticket. How is that for a succesful buisines model in China? Maybe Apple is about to figure it out.

  3. According to the latest Merrill Lynch Cap Gemini survey (2007?), China had 320,000 millionaires (those with $1 million in investible assets) in 2005, up 6.8% from 2004. China’s millionaire growth rate is the same as that of the U.S.

    National Geographic estimates that there are 100 million to 150 million Chinese with household income of at least $10,000 a year. Let’s suppose that only 10% (10-15 million) of them can afford an iPhone; that’s still a lot of sales!

    China has a huge population, 1.3 billion, over 4 times that of the US. If just 1% end up able to afford Apple products, that’s 13 million people.

  4. So…

    China, which is perfectly willing to spike wheat gluten with chemicals to game the analytic tests on protein, and which makes cheap crap, isn’t a big buyer of a premium American label for electronics goods.

    Is this a surprise to anyone?!?

  5. What does “China has an authoritarian government” and “China is number one in intellectual property theft” have to do with Mac vs. Windows/other cell phone makers?

    Is he saying Windows is a better fit because Microsoft has more experience with intellectual property thievery? ” width=”19″ height=”19″ alt=”wink” style=”border:0;” />

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