Apple's Challenge for iPhone 11: Halt Flagging Sales In China
September 20 2019 - 1:58PM
Dow Jones News
By Tripp Mickle in San Francisco and Yoko Kubota in Beijing
Apple Inc.'s store in Beijing's trendy Sanlitun neighborhood was
crowded Friday with shoppers checking out the latest iPhones -- but
the real test for the iPhone 11, analysts say, will be whether it
can sustain interest in the months ahead as trade tensions simmer
and competitors release 5G handsets.
Apple stores world-wide began selling the new iPhones Friday.
The base iPhone 11 model features a second-rear camera and a $699
price tag, $50 less than its predecessor's. The iPhone 11 Pro
models feature the same starting price as their predecessors, $999,
but offer a third rear camera and ultrawide photos.
The tech giant has been under fire in China, where phones with
similar features and lower prices from Huawei Technologies Co. and
others have sliced into its market share.
Sales in Greater China, including Hong Kong and Taiwan, plunged
20% to $32.54 billion for the three quarters ended in June, the
company reported in July. While that figure includes the iPhone as
well as other Apple devices, executives have noted weakness in the
performance of the company's smartphones in its second-largest
sales market.
In a bid to end those declines, Apple introduced new iPhones
this month that address camera and price, previous models'
weaknesses in the eyes of consumers.
Camera technology has become an important differentiator in
China, where Huawei has walloped Apple and others, amassing a 38%
smartphone market share in the June quarter, according to research
firm Canalys, after introducing a triple-rear camera model last
year. Apple captured a 6% share of the market, ranking fifth among
companies, and that was down from the prior year.
The iPhone Pro's triple-rear camera may help Apple catch up to
its biggest Chinese rival and give customers a reason to pause
before considering switching to Huawei. The new features, along
with the familiarity of using the iPhone, were enough to persuade
28-year-old Gao Zhenzhen to plan an upgrade from her iPhone 7 at
the Apple Store in Sanlitun.
"It's because I'm used to iPhones," Ms. Gao said.
Apple's high prices have contributed to its slowing China sales,
analysts say. Slashing $50 off the price of the iPhone 11 compared
with last year's XR should help broaden the appeal of the company's
lowest-priced new model. Apple also aggressively touted trade-in
offers world-wide that further discount retail prices.
The lower prices and trade-in offer helped persuade Aaron Lee,
35, to buy a new iPhone 11 for around 3,100 yuan ($440) after
trading in his XR model. "The price has reached a level where it's
convenient enough," Mr. Lee said.
Many consumers still consider Apple's phones too pricey. Zhang
Tao, a 46-year-old taxi driver in Beijing, prioritizes
affordability in choosing mobile phones. "The features of domestic
phones are getting better and better," said Mr. Zhang, who
currently uses an Oppo R15.
Apple's challenges in China are expected to intensify as local
handset makers introduce models with 5G, a new, speedier generation
of wireless technology. Huawei introduced its Mate 30 model with 5G
on Thursday and Xiaomi Corp., Oppo and Vivo are expected to release
5G-capable devices before year-end.
Chinese consumers have been anticipating the arrival of 5G and
consider it a core technology for a premium handset, said Mo Jia, a
Shanghai-based analyst for Canalys. "This is, of course, a
significant weak point for Apple in terms of premium smartphones,"
he said.
Apple also is battling U.S.-China trade tensions that could sour
some Chinese consumers on U.S. brands. The company has largely
stayed out of the crossfire, but its reliance on China for a fifth
of its total sales makes it vulnerable if China retaliates against
continued pressure from U.S. tariffs.
The combination of 5G and trade, as well as perceived lackluster
features on the iPhone 11, has Nomura Instinet analyst Jeff Kvaal
doubting Apple will gain market share in China over the next
year.
"This upgrade simply isn't all that dramatic," Mr. Kvaal said of
the new iPhones. "Typically, they offer refreshes with more
dramatic upgrades than adding a camera."
Dow Jones & Co., publisher of The Wall Street Journal, has a
commercial agreement to supply news through Apple services.
Write to Tripp Mickle at Tripp.Mickle@wsj.com and Yoko Kubota at
yoko.kubota@wsj.com
(END) Dow Jones Newswires
September 20, 2019 13:43 ET (17:43 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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