http://m.todayonline.com/chinaindia/china/chinese-consumers-fall-out-love-iphones
[sizeg=4]Chinese consumers fall out of love with iPhones[/size]
An Apple store in Beijing. The company’s earnings report on Tuesday (April 26) showed how hard it can be to keep the attention of fickle consumers in China. Photo: The New York Times
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BY
PAUL MOZUR
PUBLISHED: 1:29 PM, APRIL 28, 2016
HONG KONG — Since 2010, Mr Yu Kai has followed the same ritual every year: When a new Apple iPhone comes out, he gets rid of his old one and heads to a store in Beijing to buy the latest model. This year, however, he held back.
Instead of buying the iPhone 6s, he has been waiting to see what the next iPhone looks like, and he said he might even switch to a model by a different maker.
In China, where Apple has been a signifier of wealth and fashion, and where many Chinese update their smartphones each year, Mr Yu is not an outlier.
Apple’s second-quarter earnings report on Tuesday (April 26) showed how hard it can be to keep the attention of China’s fickle and increasingly hard-to-impress consumers. Mr Tim Cook, the company’s chief executive, said in an earnings call that sales in mainland China had fallen 11 per cent compared with the same period a year ago.
Mr Cook noted that sales had dropped from a high level: In the first quarter of last year, sales were 80 per cent higher than in the same period in 2014. But the decline announced on Tuesday is a setback for one of the most beloved brands in China.
China’s young, middle-class consumers are increasingly willing, analysts say, to try phones from the many competitors — including Huawei, Meizu and Xiaomi — that seek to compete with Apple on technical specifications and aesthetics but offer their models for a few hundred dollars less.
Many customers like Mr Yu, who is 29 and self-employed, consider the phone they use part of their identity, leading them to look at a broad range of available models. That being the case, Apple will have to fight to maintain its dominance of the high end of the market.
Apple also faces other obstacles in China. Last week, the company’s iBooks Store and iTunes Movies services were shut down by a Chinese regulator, just six months after they started operating there. The rare about-face by China suggests that Apple could face further pressure as the Chinese government increases its scrutiny of US companies’ operations within its borders.
In the past four years, to meet strong demand in China for its products, Apple increased the number of stores there to 35 from just a handful, and Mr Cook said on Tuesday that there would be 40 by the end of June. The company has also been able to tap into the enormous customer base of China’s largest wireless carrier, China Mobile, after years of talks resulted in an agreement in 2013 that brought the iPhone to the carrier. The deal contributed to Chinese consumers spending US$59 billion (S$79 billion) on Apple products in the latest fiscal year.
But one challenge for Apple this year is that its most recent models do not represent a big leap from the previous generation.
“Everyone bought a 6 series,” Mr Steven C Pelayo, a technology analyst at HSBC (Hongkong and Shanghai Banking Corporation) in Hong Kong, said by email, referring to models introduced in late 2014. They “were less inclined to upgrade to a 6s, which only had very minor changes,” he added.
Mr Qu Dewei, who has been selling smartphones for four years in a technology mall in eastern Beijing, said it had been tough to sell iPhones since September 2015, when the iPhone 6s came out.
“It’s been bad since then; it’s been really bad,” Mr Qu said as he leaned on the counter at his stall.
On Wednesday afternoon, the mall where he works was largely empty.
“None of the brands do really great,” he said. “But while I might sell one or two Huawei phones in 10 days, I may not even sell one iPhone 6s.”
For years, smugglers have done a brisk business taking iPhones to mainland China from Hong Kong, where they cost less. But even the illegal sellers are feeling the pressure. In interviews, four smugglers who did well a year ago said they had quit the trade.
The iPhone’s weaker sales also reflect the broader slowdown in growth in China’s enormous smartphone market. Mr Jason Low, an analyst in Shanghai with the research group Canalys, said he expected the Chinese smartphone market to grow only 4.7 per cent this year. As recently as 2013, it was growing 50 per cent annually.
“If you look at the entire market, Apple cannot fight off so many competitors, like Samsung and local brands like Huawei and Oppo,” he said. “They’re all trying to raise the average selling price, and that will bleed into Apple’s sales flow.”
Despite the pressure, Mr Cook said in the earnings call on Tuesday that Apple was “optimistic” about China, even if it was losing ground. There is even a precedent for an Apple recovery: In 2012 and 2013, the company’s sales growth in China slowed as competitors like Samsung offered phones with larger screens, which are very popular in China. When Apple finally released a phone with a similar screen size in 2014, its market share rebounded.
In many ways, the company is in a similar position today. Samsung’s Edge phones stand out with screens that have rounded edges on one side, and many in China say the camera on Huawei’s flagship model is better than Apple’s camera. That puts more pressure on Apple to pack new features into the next iPhone, which is expected to come out this autumn.
For Ms Mo Chen, a 26-year-old public relations professional who owns an iPhone 5, the next Apple smartphone will have to do much more than her current model for her to be tempted. She was blunt in her criticism: “The iPhone 6 and 6s are really ugly.”
Many of Ms Mo’s co-workers and former classmates use Android phones, she said, and she is considering switching to a device by Samsung of South Korea or to a Chinese phone made by ZTE or OnePlus.
“I like Apple a lot,” she said. “I use an Apple computer. But in recent years, especially after I tried my friends’ Android phones, I realised that the brand has lost a bit of its charm.” THE NEW YORK TIMES
[sizeg=4]Chinese consumers fall out of love with iPhones[/size]
An Apple store in Beijing. The company’s earnings report on Tuesday (April 26) showed how hard it can be to keep the attention of fickle consumers in China. Photo: The New York Times
View all 0 comments
BY
PAUL MOZUR
PUBLISHED: 1:29 PM, APRIL 28, 2016
HONG KONG — Since 2010, Mr Yu Kai has followed the same ritual every year: When a new Apple iPhone comes out, he gets rid of his old one and heads to a store in Beijing to buy the latest model. This year, however, he held back.
Instead of buying the iPhone 6s, he has been waiting to see what the next iPhone looks like, and he said he might even switch to a model by a different maker.
In China, where Apple has been a signifier of wealth and fashion, and where many Chinese update their smartphones each year, Mr Yu is not an outlier.
Apple’s second-quarter earnings report on Tuesday (April 26) showed how hard it can be to keep the attention of China’s fickle and increasingly hard-to-impress consumers. Mr Tim Cook, the company’s chief executive, said in an earnings call that sales in mainland China had fallen 11 per cent compared with the same period a year ago.
Mr Cook noted that sales had dropped from a high level: In the first quarter of last year, sales were 80 per cent higher than in the same period in 2014. But the decline announced on Tuesday is a setback for one of the most beloved brands in China.
China’s young, middle-class consumers are increasingly willing, analysts say, to try phones from the many competitors — including Huawei, Meizu and Xiaomi — that seek to compete with Apple on technical specifications and aesthetics but offer their models for a few hundred dollars less.
Many customers like Mr Yu, who is 29 and self-employed, consider the phone they use part of their identity, leading them to look at a broad range of available models. That being the case, Apple will have to fight to maintain its dominance of the high end of the market.
Apple also faces other obstacles in China. Last week, the company’s iBooks Store and iTunes Movies services were shut down by a Chinese regulator, just six months after they started operating there. The rare about-face by China suggests that Apple could face further pressure as the Chinese government increases its scrutiny of US companies’ operations within its borders.
In the past four years, to meet strong demand in China for its products, Apple increased the number of stores there to 35 from just a handful, and Mr Cook said on Tuesday that there would be 40 by the end of June. The company has also been able to tap into the enormous customer base of China’s largest wireless carrier, China Mobile, after years of talks resulted in an agreement in 2013 that brought the iPhone to the carrier. The deal contributed to Chinese consumers spending US$59 billion (S$79 billion) on Apple products in the latest fiscal year.
But one challenge for Apple this year is that its most recent models do not represent a big leap from the previous generation.
“Everyone bought a 6 series,” Mr Steven C Pelayo, a technology analyst at HSBC (Hongkong and Shanghai Banking Corporation) in Hong Kong, said by email, referring to models introduced in late 2014. They “were less inclined to upgrade to a 6s, which only had very minor changes,” he added.
Mr Qu Dewei, who has been selling smartphones for four years in a technology mall in eastern Beijing, said it had been tough to sell iPhones since September 2015, when the iPhone 6s came out.
“It’s been bad since then; it’s been really bad,” Mr Qu said as he leaned on the counter at his stall.
On Wednesday afternoon, the mall where he works was largely empty.
“None of the brands do really great,” he said. “But while I might sell one or two Huawei phones in 10 days, I may not even sell one iPhone 6s.”
For years, smugglers have done a brisk business taking iPhones to mainland China from Hong Kong, where they cost less. But even the illegal sellers are feeling the pressure. In interviews, four smugglers who did well a year ago said they had quit the trade.
The iPhone’s weaker sales also reflect the broader slowdown in growth in China’s enormous smartphone market. Mr Jason Low, an analyst in Shanghai with the research group Canalys, said he expected the Chinese smartphone market to grow only 4.7 per cent this year. As recently as 2013, it was growing 50 per cent annually.
“If you look at the entire market, Apple cannot fight off so many competitors, like Samsung and local brands like Huawei and Oppo,” he said. “They’re all trying to raise the average selling price, and that will bleed into Apple’s sales flow.”
Despite the pressure, Mr Cook said in the earnings call on Tuesday that Apple was “optimistic” about China, even if it was losing ground. There is even a precedent for an Apple recovery: In 2012 and 2013, the company’s sales growth in China slowed as competitors like Samsung offered phones with larger screens, which are very popular in China. When Apple finally released a phone with a similar screen size in 2014, its market share rebounded.
In many ways, the company is in a similar position today. Samsung’s Edge phones stand out with screens that have rounded edges on one side, and many in China say the camera on Huawei’s flagship model is better than Apple’s camera. That puts more pressure on Apple to pack new features into the next iPhone, which is expected to come out this autumn.
For Ms Mo Chen, a 26-year-old public relations professional who owns an iPhone 5, the next Apple smartphone will have to do much more than her current model for her to be tempted. She was blunt in her criticism: “The iPhone 6 and 6s are really ugly.”
Many of Ms Mo’s co-workers and former classmates use Android phones, she said, and she is considering switching to a device by Samsung of South Korea or to a Chinese phone made by ZTE or OnePlus.
“I like Apple a lot,” she said. “I use an Apple computer. But in recent years, especially after I tried my friends’ Android phones, I realised that the brand has lost a bit of its charm.” THE NEW YORK TIMES
