Apple's fortunes rise in China, despite sagging market share

IDG News Service - A cheaper iPhone ? A deal with China Mobile ? Despite having neither of the two, Apple reported strong earnings in the Chinese market in its fiscal first quarter, with revenue buoyed by triple digit growth in iPhone sales.

The company's revenue for the Greater China region, which includes Hong Kong and Taiwan, grew 67% year-over-year, Apple said in its financial results on Wednesday. A high point in the robust earnings was the "exceptional growth" in iPhone sales in the region, which more than doubled from the same period last year, stated its CEO Tim Cook in an earnings call.

The U.S. tech giant is paying increasing attention to China, with Cook stating earlier this month he expected the country to one day become its largest market.

But Apple will have to contend with the rising presence of local Chinese handset makers, which are dominating the sector with low-end handsets, priced sometimes five times cheaper than the iPhone.

The absence of a lower-priced iPhone, and the lack of a deal to sell its product through the nation's largest carrier, China Mobile, have often been seen as factors limiting Apple's growth in the country. In contrast, rivals such as Samsung, Lenovo, Huawei and ZTE offer a wide range of handsets through China's different carriers, and led the nation's smartphone market ahead of Apple in last year's third quarter.

Apple, however, still has great potential in the market, as evidenced from surging iPhone sales, said Teck Zhung Wong, an analyst with research firm IDC. "Whether they're going to come out with a cheaper iPhone or new models, I don't think that's such a crucial factor," he said. "Every time they come out with a product refresh you'll still see a big spike in the launch quarter."

This past December, Apple launched its iPhone 5 in China, which is expected to have boosted the company's market share in the fourth quarter of last year. Apple's share dropped from 19% in the first quarter of last year, to 10% in the second, and then further declined in the third, Wong said.

But despite the sagging market share figures, Apple's smartphone shipments in China have consistently grown because the nation's smartphone sector is booming in size. In the third quarter, smartphone shipments to the nation's market reached over 60 million, about 2.5 times more when compared year-over-year, Wong said.

"If you look at Q3, and how Apple's market share was less than 10%, people will just scream and say Apple is going downhill," Wong said. "But Apple has been shipping more units than before, so it has a good performance if you look at it this way."