By Yoko Kubota in Beijing and Tripp Mickle in San Francisco
The signature features of Apple Inc.'s new iPhones--bigger
screens and dual-SIM support--speak directly to demands in the
all-important China market.
Chinese rivals already offer similar features for less money,
however. That means the improvements may help Apple retain its
market share in China, but may not be able to win new converts to
Apple's ecosystem--and that could keep sales flat, analysts
say.
"It's still hard for Apple to attract wider Chinese consumers
from Android users," said Mo Jia, a Shanghai-based analyst at
market-research firm Canalys, citing "the extremely high price band
compared to local high-end Android products."
The Apple iPhone launch also drew criticism on Chinese social
media Thursday. During the launch announcement at Apple
headquarters in Cupertino, Calif., a day earlier, an image of
global release dates projected on stage included Taiwan and its
flag as distinct from China.
Taiwan has an independent government, but China claims the
island as its own and has previously pushed airlines, hotelier
Marriott International Inc. and other companies to change online
references that suggest Taiwan isn't part of China.
"Apple, what did you mean at the launch event?" the Communist
Youth League posted on its Weibo social media account. The
Communist Party tabloid Global Times reported online that Chinese
netizens are urging Apple to follow the one-China principle.
Apple didn't immediately reply to a request for comment.
The starting price of the new phones by Apple will range from
about $950 and $1,400 in China, while a handset produced by rival
Huawei Technologies Co. with a dual-SIM-card feature and similar
screen size can be found for about $660.
After back-to-back years of steep sales declines, Apple's China
business has bounced back recently, helping the company hit record
profits. Revenue in the region has risen 16% to $40.53 billion in
the three fiscal quarters ended in June. Greater China accounts for
about a fifth of its total revenue.
Yet its market share in China has been treading water. Once the
top seller in China, Apple is now the fifth best-selling brand with
a 6% market share in April-June, down 1 percentage point from a
year earlier, data from Canalys showed.
To be sure, that may not matter for Apple's profitability. As
the global smartphone market contracts, Apple's focus has shifted
from units it ships to higher profit margins. Just maintaining a
similar shipment scale could help drive Apple's profitability
again, Mr. Jia of Canalys said.
While Apple remains a status symbol in China, it has been
trailing homegrown rivals Huawei, BBK Electronics Corp.'s Oppo and
Vivo brands, and Xiaomi Corp.
In an effort to revive its fortunes in the region, Apple offered
software updates tailored toward China including the addition of
voice dictation in the Shanghai dialect and support for QR codes,
used widely for mobile payments. It last year also named its first
executive with oversight of the China business.
With the latest models, Apple took a further step with a
China-specific hardware update, willing to stomach extra costs with
modifications to the dual-SIM-card feature it is adding to the new
handsets.
An acronym for subscriber identity module, SIMs are microchips
that allow smartphone users to access a wireless network. With dual
SIM, users can use two phone numbers on one device.
Outside of China, the new iPhones feature a technology that
blends a physical SIM with an eSIM technology, a digital embedded
SIM that lets wireless subscribers store a second phone number on
the device without a second physical SIM card.
But in China, that is a challenge because of regulations that
require carriers and regulators to be able to track the device
user's identity. That would be difficult to do with eSIM, which
would be embedded by Apple and not the carriers.
Therefore, Apple has added trays for those physical SIM cards in
China alone, further complicating a difficult supply chain by
requiring additional components and different production
processes.
China is the world's biggest market for dual-SIM smartphones,
according to Canalys. The feature is popular among users with two
numbers for business and private use, or those who use one SIM card
for phone calls and another for internet access.
It's also a benefit for international travel. More than 62
million Chinese vacationed in other countries last year, twice as
many as five years earlier.
The dual-SIM feature is attractive for Chinese consumers, but
nothing new, analysts say. In April-June, only 6.6% of smartphones
sold in China had one SIM card, said Canalys's Mr. Jia.
Along with dual-SIM slots, Apple on Wednesday introduced two new
models with its largest iPhone screens ever: a 6.5-inch display
called iPhone XS Max using advanced, OLED technology and a lower
priced device with a 6.1-inch LCD display, called iPhone XR. It
also unveiled a 5.8-inch OLED screen version, called the iPhone
XS.
The new iPhones' bigger screens will meet the taste of Chinese
consumers who are highly reliant on smartphones to go online to
shop, pay for goods, hail cabs, play games or watch popular live
video streaming. In China, 788 million people, or 98% of internet
users, go online using mobile phones, according to the China
Internet Network Information Center, a government-affiliated
agency.
Yet Chinese competitors have already offered phones with
displays larger than 6 inches. Huawei's recently unveiled Honor 8X
Max's display size is 7.12 inches.
Chinese consumers tend to especially value new looks of products
and could be turned off by Apple's new models that look similar to
the previous version, said James Yan, an analyst at Counterpoint
Research based in Beijing.
In China, the iPhone XS Max starts at 9,599 yuan, or about
$1,400, while the iPhone XR starts at 6,499 yuan, or about
$950--higher than the U.S. price tags of $1,099 and $749
respectively, partly due to tariffs.
By comparison, one of Huawei's current high-end models, the P20
Pro, starts at 4,488 yuan, or about $660. The company is set to
unveil its latest products next month.
On Chinese social media, the cost of the new iPhones was one of
the main discussion points.
"We are all talking about the high price," said a user with the
name of Kena Shazhou on the microblog Weibo. "However this may
actually suit the vanity of some Chinese people." Another
commented: "Even the lowest price is enough for two good Android
phones."
Apple assembles most of its iPhones in China. While smartphones
have so far evaded U.S. tariffs, Apple has said its watch, wireless
headphones and other goods would be hit by proposed U.S. tariffs on
$200 billion of Chinese goods.
Yang Jie in Beijing contributed to this article.
Write to Yoko Kubota at yoko.kubota@wsj.com and Tripp Mickle at
Tripp.Mickle@wsj.com
(END) Dow Jones Newswires
September 13, 2018 09:14 ET (13:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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