Forbes Details Apple’s China Mistakes
9:49 am, December 4th, 2009, Ed Sutherland
Companies considering introducing products in China may use Apple’s experience as a textbook on what mistakes to avoid. China, with billions of consumers, would seem to be the perfect market for the iPhone, one of the hottest consumer gadgets the Cupertino, Calif. company sells. However, CEO Steve Jobs and others made a number of unforced errors in China, besides those widely-publicized, according to Forbes.
In a review of the lackluster launch of the iPhone in China, Shaun Rein of the China Market Research Group, details several factors which likely caused Apple to stumble right out of the gate.
China’s cell phone owners mostly use pre-paid calling, rather than opting for a contract. “Top-up cards can be bought and recharged cheaply at street vendors everywhere in less than 30 seconds, with no identification required. Subscribing by the month is a pain,” Rein writes.
Apple also failed to consider local preferences which show typical Chinese spend under $12 per month, text more than make voice calls and change phones often, according to the article.
The second mistake Apple made in China was first picking China Unicom with 30 percent of the market instead of China Mobile which controls 70 percent of the nation’s cell phones.
“Our research suggests that most consumers believe China Mobile has better signal stability than China Unicom, especially in regional cities beyond Shanghai and Beijing, where more and more business trips and vacations are taking place,” said Rein.
Unlike in the U.S., where people flocked to AT&T just to get the iPhone, Chinese do not want to change carriers. Number portability is also not present, an additional factor in the reluctance of China consumers to switch carriers just to obtain the iPhone.
Finally, the Forbes piece points to what it calls Apple’s “biggest mistake of all” in China: waiting two years after the U.S. launch. While demand is slowing in the U.S. and Europe, China, India and Brazil are growing. “Consumers in those places don’t want to wait years to get a product they read about online the moment it comes out,” according to Rein.
These factors are on top of the many others, including the presence of millions of black-market iPhones (with the Wi-Fi unavailable in early iPhones Apple sold through China Unicom), selling just 5,000 iPhones in China during the first week and reports a China online retailer sold just 5 Apple handsets in two weeks.
Posted by Ed Sutherland in News | Comment on this article
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I don’t understand it when people refer to China and the Billions of consumers. China has just over a Billion people and probably 95% of them live in poverty. Is it any wonder why the chinese aren’t buying expensive western toys?
Dr. Evil, on December 4th, 2009 at 10:23 am
There are millions of iPhones in China as indicated by this article. Apple is doing fine. What this article should have said the lesson for the Chinese government and China Unicom is to not remove features and charge more for a product that is easily available on the outside. Apple will reap the benefit of selling millions of phones to Chinese whether they are bought in China or not. They will also reap the benefit of selling millions of apps to the Chinese. Apple doesn’t control China Unicom and it’s not like they have that much choice.
Gerard, on December 4th, 2009 at 11:47 am
China. Billions of people. 95% are poor people living in Stone Age conditions.
Apple’s First Mistake: Selling the “Mercedes-Benz of Electronic Devices” in a communist nation where 95% of the population are poor people living in Stone Age conditions, and where 99.9999% of anyone with an electronic device will only buy one if it’s a black market fake (hacked, stolen, illegal copy, counterfeit, etc).
Apple: get out of China. Go back to selling your quality wares in civilized nations.
Movado, on December 4th, 2009 at 12:54 pm
A better article would be why does Forbes never write anything bad about Palm? Does it have something to do with Elevation Partners owning a piece of Forbes as well as all of Palm?
Jed, on December 4th, 2009 at 12:56 pm
Doing business with China has enormous risk for patented technology .Firstly,If you want to make money in China,you must be ready to have local government acquainted partners(oligarchs) in China and share 50% of your profit.Most of the time you have to make extensive hardly earned technology transfer.
If you don’t share your technology,they will find a way for spying on you with the thousands of Chinese engineer you’ve hired.
In the case of the IPhone,Chinese companies had for years counterfeited the Apple brand name by producing a cheaper IPhone clone with Wifi capability and same features,long time before wifi was available on the real Iphone.It look just like an Apple Iphone.No wonder Apple IPod or IPhone were not successful in China.
Its time now for Apple to setup R&D center in India, a country that respect license patents.Indians are a lot more creative and the government,less intrusive.And the 1.3 billion population, with a sizable westernized middle class,will rival the Chinese middle class in term of money power.Indians are less frugal than Chinese,they spend more on quality brand named.They respect brand and try to create their own brand instead of making copy cat.Indians are so much competitive and respectful of brands,they are ready to purchase expensive British or American top brand name.Take as example :”jaguar,Land rover,Tetley tea.Those companies were purchased by Indian companies long before the recession, when they were very expensive.Apple can make a lot of money in India and in same time,have access to millions of Indian creative engineers.Indians invest more in north America than China.Indian entrepreneurs create jobs in north America.Chinese spending and investment is mostly in surrounding Asian countries.
Jeff Robinson, on December 4th, 2009 at 3:09 pm
But Why Apple Is Not Launching iPhone 3GS In India. We Have Been Waiing For It Since August And Still No Sign Of It’s Launch.
How Can Apple Ignore India And What More Loyalty Does Apple Expects From Its Consumers In India That They Are Still Waiting For Its Launch
Shivali, on December 5th, 2009 at 2:25 am
The mistakes mentioned in the article are so obvious that I think Apple did not mean to start selling iPhones now. I would assume Apple is just settling down and preparing for massive invasion in China’s market with pay-as-you-go by February 14.
vp, on December 5th, 2009 at 2:55 am
according to the us apple site (http://www.apple.com/iphone/buy/), the iphone ranges from USD 99 to USD 199. on apple’s chinese site (http://www.apple.com.cn/retail/iphone/) the phone ranges from USD 732 to USD 1,025 (according to today’s exchange rate 1.000USD to 6.827RMB). am i missing something? why is there such a difference? for USD 1,000 you could buy a round trip ticket to america and buy an iphone there! why would anyone spend so much on a phone when he or she could a) ask a friend to bring one back from america for a fraction of the mainland market price or b) buy a smuggled one for a fraction of the mainland market price?
xiaofantong, on December 5th, 2009 at 8:50 am
Dr. Evil and Movado, make your research before commenting. China is rising. As a matter of fact, poverty has been reduced by 50% since the 1980’s and is now at less than 8% of the whole population. Meanwhile, the US of A is struggling with financial problems. Their economy is degrading, poverty is rising, more and more westerners choose to make a future here in China, esp. in Shanghai and Beijing. China is at the same stage as Japan in the post-world war era, copying brands and learn through it, then inventing new ones (Sony, etc.). I’ve a chinese friend who has bought iPhones ever since it got released. She has bought like 6 iPhones since then. Almost RMB 7000 a piece. And honestly, only idiots would change carriers and subscribe to it only to get their hands on that thing.
Shagua, on December 5th, 2009 at 1:48 pm
Apple’s mistakes in China (which seem to have more to do with China’s own complex and confused political/economic system) aside, I’ve long been puzzled by Apple’s neglect of the Indian market. Mac OS X 10.6 was supposed to be the “fix-it”, fill-in-all-the-missing-features version, but it still lacks something I’ve been waiting for (as an American scholar of Buddhism and Indian and related languages and cultures) since 2002: full support for complex South & Southeast Asian scripts.
Thus anyone who works with Sanskrit (or Pali, Hindi, Marathi, etc.) texts on the Mac has a choice of one (count ‘em – 1) font for the customary Devanagari script (the most commonly used in India) that will work with OS X, though dozens (perhaps hundreds) of free Devanagari fonts (many of them superior to Apple’s offering) are available on the ‘Net. (Windows 7 includes a dozen or more Devanagari fonts, none of them usable in OS X.)
Even in the classic Mac era, though Apple eventually released an Indian Language Kit with support for the major North Indian scripts, none of Apple’s own software (except SimpleText) actually worked with it! Apple has never really taken India seriously as a market, despite that it’s had a large, educated, cosmopolitan middle class far longer than China.
Of course it’s true that India’s educated class mostly works in English, but Microsoft (and Linux) doesn’t seem to have made that an excuse not to support their native languages. Apple’s contemptuous attitude toward India can’t be making many friends there.
I don’t know if Apple’s Help lines still go to India, but if so, it’s ironic that the people you talk to there probably can’t use the Mac in their own languages. (Most, I believe, are in Bangalore, India’s “Silicon Valley”, where the native language/script is Kannada, for which a $50 third-party package with a single font is the only option, though numerous free Kannada fonts are available for Windows and Linux.)
HandyMac, on December 6th, 2009 at 12:02 pm
95% of Chinese live in poverty? Where do you get your facts from Dr Evil? China is a developing nation not a 3rd world nation and they are developing at an eye watering pace. There are over 600 million cell phone users in China and whilst it is true that a large proportion of them cannot afford iPhones, it will not be very long before they can. The Chinese middle class is rising and their spending power is phenomenal. China’s population is estimated at 1.3 billion, not 1 billion and this is a conservative under estimation because due to the one child policy many families do not register their children. Maybe you should visit China and properly assess the vast potential for consumer products here before opening your mouth. Apple’s biggest mistake was that they were too slow to market. That’s it.
The other half of the problem is the difficulty of working with the Chinese, who can be a nightmare to work with. Every single western company that has entered the Chinese market has made mistakes and/or been shafted by the crafty Chinese!
FR, on December 7th, 2009 at 4:26 am