Apple's Chinese Trouble
Sumith is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Apple (NASDAQ: AAPL) triumphed over Samsung in its patent infringement battle in a US court, but miles away the results aren't that comforting for the world's most valuable company. Reports from China indicate that Apple's share of the smartphone market in that country is now down to 10 percent for the April to June period.
China is set to overtake the United States as the world's largest smartphone market this year, driven by a variety of reasons ranging from the subsidies offered by the main carriers to ever increasing numbers of tech savvy consumers. The country for the first time reported more smartphone shipments than feature phones in the second quarter. All this would have been good news for Apple, but that wasn't to be. Local brands like Lenovo and ZTE have now pushed Apple to fourth place from its earlier second position.
The total shipment of smartphone in the April to June period rose to 44 million accounting for 51 percent of the total mobile shipment of 87 million.
The reason behind the sluggish Apple figures could be due to the wait consumers are ready to undertake for the new iPhone which would be out later this year. Also there is no denying the fact that the alternatives to the iPhone are also fast catching up and are proving to be a much more attractive bargain.
Apple's biggest rival in the smartphone market Samsung leads the competition in the Chinese market with a pretty good 19 percent. Although it should be noted that the figure is down from 21 percent in the previous quarter. Samsung is followed by Lenovo with a market share of 11 percent. This is up from a single digit percentage in the previous quarter. At third is ZTE followed by Apple and Huawei Technologies.
For Apple, the world's most valuable company, China is the second largest market after the United States. And considering the huge growth potential still in store, it is likely to overtake the United States as the largest market for Apple's products by 2014.
When it comes to the overall mobile phone market in China (smartphones and feature phones) the top three rankings is shared by Samsung, Nokia and ZTE in that order. Samsung still tops the Chinese market followed by Nokia and then the local brands. But it would really be interesting to see how long Samsung and Nokia can hold on to this spot.
In the coming future we would see more of these Chinese brands gain larger market share due to their close ties to local carriers and more aggressive marketing blitz.
When you think of a smartphone battle can the chipmakers be left behind? US based Qualcomm Inc (NASDAQ: QCOM) has been trying to garner a larger share in the fast booming Chinese market long dominated by Taiwan's Mediatek Inc. Qualcomm is working on cutting the prices of its chips to compete with more and more players in the already crowded market. With the price of the chips coming down, it would also affect the prices of smartphones, helping bring them down even further. This could lead to lesser royalty for chipmakers like Qualcomm. But the only way to ensure against such a downside is to increase the volumes considerably thereby negating any downward effect from the pricing cut.
On the global market front Qualcomm is learning to negotiate the treacherous path as a number of competitors such as Nvidia, Intel, and Broadcom have emerged to challenge its dominance in the mobile space.
With the focus of battle now shifting to China (fastest growing in the world), Qualcomm will be hoping it does not go the way of RIM and Nokia who lost their way after being dominant players in the mobile technology space.
sumith123 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Qualcomm. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.