Apple's Achilles' Heel in China is Services (and WeChat)

LinkedIn ^ | June 13, 2016 | Jeffrey Towson

[Shanghai Dan]

Apple's success in China has been spectacular. Truly outstanding. But while the "Apple in China" story is usually told in terms of the rise (and now leveling off) of iPhone sales, it has been just as big a success in terms of brand building and customer capture.

Apple today is known and pretty loved by China's increasingly wealthy urban middle class. And the company has a commanding position in the lucrative "affordable luxury" market segment. Apple’s success in rising consumer China is even better than its growth numbers imply.

However... (you knew it was coming)

While capturing Chinese consumers has been a big accomplishment, the critical question now is “can they keep them?” And a big part of the answer – and their biggest risk going forward – is whether or not they can address their lack of services in China.

[Shanghai Dan]

The author (an economics professor in Beijing) makes great points. A lot of the lock-in that consumers experience in the rest of the world help keep Apple consumers from moving. Media, apps, user experience - learning and buying new can be troublesome.

However, as the author points out, 3rd party media, apps and even user experiences (because a user rarely leaves an all-in-one app like WeChat) are dominant - hugely so - in China. There is almost zero lock-in for Apple from the services side. Consumers lose essentially nothing when they switch phones.

Witness the " slippage by leaders such as Apple (down by 26% in the latest earnings report)" in the China market. That's a huge tumble - and it points to the fact that other hardware is just as nice and premium. Consumers in China will jump to new hardware that is the "latest" thing to have, because they are not constrained or captured by the rest of the ecosystem.

Look for the rise of Huawei and Xiaomi to continue. Samsung to struggle to hold it's top spot - and Apple to get left further behind as it just does not compete on price, exclusivity (the Huawei Mate 8 is the most desired phone in China), and increasingly on the ecosystem of installed software.

Once Foxconn releases their branded phones, the market will seriously shift and I expect it will be Huawei and Foxconn dominating the China market, with Samsung, Apple, and Xiaomi fighting for 3rd place (which would have probably less than 15% of the overall China market).

[entropy12]

Of course the Chicoms love Apple...Most all Apple products are manufactured in China. I will never buy anything made in China unless there are no options.

[PGR88]

Actually it’s probably the opposite. The chinese government distrusts, and ultimately will undermine, ANY organization it does not control completely.

[Organic Panic]

If it wasn’t Apple iphone knock offs would be sold at Harbor freight for $20.

[Swordmaker]

LinkedIn report about Apple potentially losing market share in China due to not having services in China. LinkedIn is now going to be owned by Microsoft. Hmmmmm. The author of the article postulates that Apple cannot compete against 3rd party apps such as WeChat to keep customers locked in. He further complains that Apple refuses to compete on price. — PING!

Apple in China
Ping!

The latest Apple/Mac/iOS Pings can be found by searching Keyword "ApplePingList" on FreeRepublic's Search.

If you want on or off the Mac Ping List, Freepmail me

[Swordmaker]

Of course the Chicoms love Apple...Most all Apple products are manufactured in China. I will never buy anything made in China unless there are no options.

Well, you've got a problem. There are essentially zero Consumer Electronic devices that are not built in China. Some iPhones are assembled in Brazil. Many Apple computers are made in the United States. The iMacs are assembled in Elk Grove, California, and the MacPro is manufactured in Austin, Texas. All of Apple's products are designed in California. Can you name any other computer that is made in the United States?

[Shanghai Dan]

Uh, the author is NOT associated with LinkedIn in any way, shape or form other than using it. I guess people using Facebook are associated and biased about Facebook? The author - as I stated - is an economics professor in Beijing.

Oh, and Apple is losing to WeChat in China. EVERYONE is losing to WeChat in China. It’s by far and away the most dominant force in China for smartphones. It’s Facebook/SMS/Paypal/Maps all wrapped up in one. With media streams as well. If you don’t have WeChat anymore in China, it’s nearly impossible to function. It’s on 700+ million UNIQUE phones in China - that’s about an 85% penetration of the smartphone market! WeChat IS the OS/UX for the vast majority of smartphone users - including iPhone users.

[entropy12]

lol that is why I am still using my 10 year old desktop! It is still too fast for my finger speed and my brain speed.

I spent a career developing expert software for manufacturing automation and designing machines which take more brutal punishment than any other machine in the world (cold extrusion of steel) and 97.5% of my time was spent in perfecting the algorithms and assembling technical data and 2.5% to write the compiler code of 500,000 lines.

[Chgogal]

When is Tom Cook going to step down?