Apple's China Mobile iPhone debut sees mediocre reactions

New York TimesJanuary 17, 2014 

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Apple CEO Tim Cook, left, and China Mobile Chairman Xi Guohua, right, visit a China Mobile shop Friday to celebrate the launch of iPhone 5S and iPhone 5C on China in Beijing, China.

CHINAFOTOPRESS — CHINAFOTOPRESS VIA GETTY

— Apple is counting on a long-awaited agreement with China Mobile, the world’s largest cellular operator, to reverse its fortunes in China. But the initial reception was muted Friday, when customers were finally able to buy iPhones from China Mobile.

Instead of the round-the-block lines that have greeted Apple product introductions in China and other countries in the past, only about a dozen customers showed up to buy iPhones at the opening of a store in Beijing – despite the presence of a special guest, the Apple chief executive, Timothy D. Cook.

Cook’s trip to Beijing was a testament to the importance that Apple has attached to the introduction of iPhones on a mobile network with more than 750 million customers. The agreement to sell the iPhone 5S and 5C was announced in December, after years of negotiations.

When iPhones were introduced in China five years ago by the country’s second-largest mobile operator, China Unicom, they found a ready market among trend-conscious consumers. Since then, despite adding the country’s third-biggest carrier, China Telecom, to its lineup, Apple has lost ground to the market leader in smartphones, Samsung Electronics, and cut-price domestic rivals. Its market share in China has fallen into the single digits.

Apple’s challenges mirror those of some other Western brands in China, which gained a loyal following as the country’s economy boomed. From Gillette razors to Chateau Lafite-Rothschild wine, imports were generally seen as superior to the domestic alternatives.

More recently, foreign brands have been subjected to intense scrutiny by the Chinese news media, especially the state-run CCTV, prompting consumers to reconsider domestic alternatives. In one of the most recent examples, Wal-Mart this month recalled donkey meat that it was selling at several outlets in China after it was found to have been tainted with fox meat.

“Apple used to be the must-have, aspirational brand for all wealthy and middle-class Chinese consumers,” said Shaun Rein, managing director of the China Market Research Group and the author of “The End of Cheap China.” “But over the last year, there has been a real deterioration of the Apple brand.”

Some success stories

Some U.S. technology giants continue to thrive in China. Microsoft remains the overwhelmingly dominant provider of PC operating systems there. But others, like Facebook and Twitter, have been blocked from entering China, and still others have faded.

Google was once a leading search engine in China, but then lost ground to a local rival, Baidu, and scaled back its presence in the country rather than submit to censorship demands. Motorola was once a power in mobile phones in China, but it was supplanted by companies like Nokia of Finland – which, in turn, yielded leadership to Apple and Samsung. More recently, Cisco Systems, the maker of telecommunications network equipment, said sales in China had been hurt by disclosures of surveillance by the National Security Agency.

Apple still has fans, including some of the shoppers who visited the Beijing store Friday.

“This is like manna from heaven!” said Xia Bingyi, a 26-year-old customer from the eastern Chinese city of Jinan. She was one of 10 people who won a trip to Beijing to purchase an iPhone on the opening day of China Mobile’s offering.

Xia already owned an iPhone 4 she bought two years ago but said she didn’t hesitate to sign up for a new iPhone 5S once China Mobile began offering it.

Among consumers who have to pay their own way, however, price has been a big barrier to bringing the iPhone to a broader audience in China. The list price of 5,288 renminbi (about $875) an iPhone in China is more than many people’s monthly salary, especially outside the major cities.

‘Just the beginning’

An Apple spokeswoman, Carolyn Wu, declined to comment on the first-day sales figures.

Previously, China Mobile had reported more than 1 million preorders for the phone via its website since the deal was announced in December.

Zhang at Wedge Partners said such online registrations generally resulted in firm orders in only about one-third of cases, meaning Apple could expect to sell about 400,000 iPhones.

Overall, including the effect of customers switching from rival networks, Zhang said he expected Apple to sell about 1 million more phones per month in China as a result of the deal, on top of the roughly 3 million it has been selling.

In a market of more than 1 billion mobile phone customers, those are modest figures. That may help explain why even Cook seemed to be looking as much to the future as to the present as he traveled to Beijing for the China Mobile introduction.

In his appearance at the China Mobile store in Beijing, Cook told shoppers and reporters that “today is just the beginning of China Mobile and Apple coming together to deliver the best experience in the world.”

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