New iPhone Offers Glimmer of Hope for Firm's Chinese Business -- WSJ
August 03 2017 - 3:02AM
Dow Jones News
By Alyssa Abkowitz
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 3, 2017).
BEIJING -- Apple Inc. has been facing plenty of headwinds in
China lately, including plunging sales, increasing competition from
rival smartphone makers and pressure from the government to comply
with tough new security rules.
The new iPhone expected this fall offers a glimmer of hope, some
analysts say, thanks to affluent Chinese consumers who are willing
to pay premium prices for the latest technology.
While China's overall smartphone market is flat, the
higher-priced market, or phones that cost 4,000 yuan ($595) or
more, is still increasing, analysts say.
"Consumers are still willing to upgrade and some of them are
waiting to buy the next generation iPhone," said Jin Di, a
mobile-market analyst at research firm IDC.
Factoring in the new iPhone, research firm Canalys forecasts
shipments of 27 million iPhones, iPads and the iPod touch in
mainland China for the last four months of 2017, compared with 22
million during the same period last year.
Apple could use some good news from China. On Tuesday, it
reported that sales sank 9.5% to $8 billion in China, Hong Kong and
Taiwan, for the third quarter ended July 1. That was the
sixth-straight quarterly sales decline in Greater China.
Apple Chief Executive Tim Cook sought to put a positive spin on
the news, saying sales in Taiwan rose 20%. The rate of decline also
eased from the previous quarter, when sales had fallen 14%.
Along with shrinking sales, Apple has also been grappling with
new cybersecurity rules imposed by the Chinese government.
Last month, Apple announced it would open a data center in China
that will be operated by a government-owned firm. Over the weekend,
Apple removed virtual private network, or VPN, apps that allow
Chinese users to skirt internet censors from its App Store in China
to comply with new rules that require providers of such apps to
obtain licenses from regulators.
"We would obviously rather not remove the apps, but like we do
in other countries, we follow the law wherever we do business," Mr.
Cook said on the call with analysts, adding that Apple believes "in
engaging with governments even when we disagree."
Industry consultants say Apple is taking care not to offend the
Chinese government, especially as it prepares to launch the
critical iPhone 10th anniversary model this fall.
"What Tim Cook wants to do is make [Apple's] relationship with
the government closer," said Mo Jia, an analyst at Canalys in
Shanghai. "By cooperating with the Chinese government, the company
is trying to improve its overall presence in China."
The government cooperation may not be enough, as domestic
smartphone makers including Huawei Technologies Co. and BBK
Electronics Corp. roll out technologically advanced phones at lower
prices.
Some analysts also believe demand for the new iPhone will be
crimped by China's burgeoning love affair with the WeChat app by
Tencent Holdings Ltd., which offers social messaging, mobile
payments and a suite of "mini-programs" akin to Apple's App
Store.
WeChat is the No. 1 app in China, based on time spent using it,
and it works well on any smartphone.
Mr. Cook played down concerns over WeChat Tuesday, calling
Tencent "one of our biggest and best developers." He added, "We're
looking forward to working with them even more to build even
greater experiences for our mutual users in China."
--Tripp Mickle contributed to this article.
Write to Alyssa Abkowitz at alyssa.abkowitz@wsj.com
(END) Dow Jones Newswires
August 03, 2017 02:47 ET (06:47 GMT)
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