Apple faces major obstacle in conquering China

“Foreigners never conquer China. At least not in its entirety,” Panos Mourdoukoutas writes for Forbes. “But foreign products and services from Nike, Coca-Cola, McDonald’s, Yum Brands, and Apple might.”

“Apple’s products, in particular, hold big promise in China, as Chinese consumers see products like the iPad and the iPhone as symbols of American capitalism — and a way of life some seek to emulate,” Mourdoukoutas writes. “That’s why analysts following Apple have been excited about the company’s announcement that it will release its latest iPad on Dec. 7, and iPhone 5 on Dec. 16 for the Chinese market.”

Mourdoukoutas writes, “However, while Apple has consumer hype on its side in conquering the Chinese market, it faces a major obstacle: Low consumer income. In spite of rapid economic growth, China’s per capita GDP barely exceeds the $5,000, a fraction of that of the US and Europe. An iPhone 4S retails for 4,500 RB ($700), close to 15 percent of the per capita GDP.”

Read more in the full article here.

Related articles:
Apple’s iPhone 5 set to launch in China as regulators grant final approval for two models – November 30, 2012
China’s tablet market grows 63 percent in third quarter; Apple iPad is king with 71 percent unit share – November 28, 2012
iPad shipments for China nearly double; further cementing Apple’s dominance of China’s tablet market – November 16, 2012
Grand opening of Apple Store in Shenzhen, China draws huge crowds (with video) – November 5, 2012

16 Comments

    1. While that’s true, you ignore the status symbol aspect of visibly owning a high-profile device, which doesn’t have the ubiquity in China that it does in Western society.

      1. We’re not talking about lots of wealthy people. We’re talking about billions of people who don’t make a great deal of money. Hundreds of dollars per year. Getting connected is important, but not having a show piece. Sure, the Apple mystic appeals to the wealthy in China, but that’s a small fraction of the 1.8(?) billion people in China coupled with 1.2 billion people in India. Asia as a whole is a massive market, and I’m sure Apple will do well there, but the competition for the “average” consumer will be built on price and functionality. If at the end of the year I’ve made $1000, I’m not spending $400 on an iPad when a cheap Android tablet lets me achieve the basic connectivity I want for $30.

        1. TM…everything you say is true but you forget one thing… This is a country where they are willing to sell a kidney to own the prestige endowing iPad… Apple will not sell to everyone but they will sell billions…

          1. Well that’s what I’m saying. Apple will do well with the wealthy, (and clearly the insane), but the vast majority of people are likely to opt for the cheaper option.

            Aslo consider that China is sort of converting Communism into a sort of blend of extreme nationalism + capitalism. People wanting to do what helps China will buy the Chinese product. Same as we like to buy American wherever possible.

            1. I understand what you are saying, but the GDP numbers are skewed lower due to a large rural population. The urban middle class is well capable of buying iPhones and iPads, and what you forget is that they are great savers willing to spend a greater portion of their income on a high-ticket item. A small percentage applied to a large population can still result in a size equal to the population of the US.

              As for nationalism when it comes to buying, that’s only the case where there’s a conflict between China and the other country. As long as Apple and America stay in the good graces of China, Apple will be far preferred to the Chinese option.

              As for the number of wealthy people, I believe China now ranks #2 in millionaires behind only the US, and growing far faster. We ARE talking about lots of wealthy people.

              And as the iPad has been shown to be an educational tool, the Chinese will gravitate to it, because they’ll do anything to give their kid a leg up.

            2. +1

              Thelonious Mac’s predictions are really just worries based on very little evidence.  The article says that per capita GDP is $5000, but Thelonious says a few hundred.  Thelonious doesn’t recognize the importance of status symbols in China.  Thelonious raises the issue, but I have never heard of significant reluctance among Chinese consumers toward buying Apple products due to nationalism.

              Apple is ALREADY selling a lot of iPhones to the Chinese, before it’s even been launched in mainland China.  Until solid evidence to the contrary is available, the smart money says that iPhone & iPad sales in China will impress friend and foe alike.

    1. Yes. What if Apple first sells to the top 5% of the wealthy and the top tenth of those running the country of China. Then in 2014, Apple could start working on what is left.

  1. The exact same thing was said about the iPhone in Japan a couple of years ago. It was probably the first foreign smartphone to gain acceptance despite the naysayers claiming it couldn’t displace any of Japan’s popular feature-phones. I do agree that Apple’s iPhone prices are a bit high for the average Chinese consumer but then again Apple doesn’t need majority market share to make money.

    Obviously Wall Street will again favor Android and Windows for selling low-cost smartphones in the countries where consumers have the lowest incomes. I wonder what Wall Street has to say about companies such as BMW, Mercedes-Benz, Porsche and Ferrari. Are all those companies doomed to failure as Apple is. I’m always running across articles stating how Apple will fail no matter where it goes. It’s as if there is absolutely no need for higher-priced goods anywhere in the world. I’ve read stories where people in China have done practically anything to own an iPhone so it must have some status quality over in China.

  2. Completely ignorant article… apple has proven time and time again they have the cachet to get big incomes even from people who probably shouldn’t be their users…which is a weird accusation to make.. Yes Apple designs incredibly beautiful and desirable products. iPhones are everywhere in the Middle Kingdom.

  3. If Chinese wireless communication companies are reluctant to subsidize iPhones then millions of Chinese may not be able to afford them. What are the current monthly voice and data plans for the major wireless communications companies in mainland China?

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