|
 But manufacturers' recent earnings reports challenge those
assumptions, at least in China, the world's biggest mobile market -
where the roll-out of the next-generation 4G wireless network has
been touted as a booster for smartphone makers seeking growth as
demand in advanced countries falters.
Apple Inc's <AAPL.O> latest quarterly results showed sales of its
high-end phones in China grew at nearly twice the pace analysts had
expected. Meanwhile, budget offerings from Chinese firms won at the
cheaper end, effectively squeezing industry leader Samsung
Electronics Co Ltd <005930.KS>.
Even as Apple posted strong China sales, the South Korean tech giant
warned this month that quarterly earnings could drop 25 percent due
to an inventory build-up of cheaper phones and weaker demand for 3G
products in China.
That could suggest that Samsung's strategy of offering everything to
counter every price point may actually have left it stranded between
being a price competitive brand and a premium gadget seller. By
contrast, Apple has studiously cultivated its high-end aura, and its
iPhones and iPads continue to command a higher price tag on average
than its rivals.
Samsung has strong brand loyalty in China, but charges 60-100
percent more than Chinese-made phones with similar features, said
Tom Kang, an analyst at Counterpoint Research in Seoul. "Even though
they have a brand premium, that's a bit too much."
Samsung declined to comment for this article.
Samsung's high-end smartphones and tablets such as its Galaxy S
range, its answer to the iPhone and iPad, accounted for just a
quarter of its January-March sales volume in China, while devices
priced below 500 yuan ($80.75) made up the vast majority, according
to data firm Canalys.
At the same time, Samsung has come under pressure from the rise of
Chinese budget handset makers like Xiaomi, which this week released
the Mi 4, its new 1,999 yuan 4G handset.
Underscoring the challenges Samsung faces, it had just one model in
China's top-5 best sellers in May and June - with its big-screen
Galaxy Note 3 tied in fifth place with a Lenovo Group <0992.HK>
phone, according to Counterpoint.
CHINA SURPRISES
Apple said this week its third-quarter revenue was buoyed by
unexpectedly strong results in China, where iPhone sales jumped
nearly 50 percent in April-June.
"China, honestly, was surprising to us ... we thought it would be
strong, but it went well past what we thought. The unit growth was
really off the charts across the board," CEO Tim Cook told analysts
on Tuesday.
China Mobile Ltd's <0941.HK> 4G customer growth has been
accelerating after a tepid start in February. The number of 4G
subscribers rose to nearly 14 million in June, up from just 1.3
million at the end of February.
"A lot of China Mobile customers have been holding on to old phones,
so when the high-speed 4G came out they naturally switched to a 5S
or 5C and upgraded. This trend will only become more apparent with
the iPhone 6's release," said C.K. Lu, an analyst at Gartner.
China Mobile, the world's biggest carrier by subscribers, declined
to disclose the current breakdown of its 4G subscribers, but its
chairman, Xi Guohua, said in March that "most of our 1.34 million 4G
users are using an iPhone."
[to top of second column] |
For Samsung, the widely anticipated 4G roll-out has delivered a
mixed result.
"The roll-out of 4G helped both Samsung and Apple initially, but the
operator and regulatory body's ... policies had recently been
unfavorable towards Samsung as the 3G demand and subsidy dropped,"
said Counterpoint's Kang. "Samsung had been selling quite a lot of
volume of 3G phones to Chinese operators but that demand dropped
sharply. The recent pro-4G policies that penalized 3G vendors ...
was not favorable to Samsung."
Samsung said earlier this month its China sales were hurt by price
competition in the low- to mid-tier sectors as well as tepid sales
of 3G devices, as buyers wait to buy high-end 4G phones.
IPHONE 6 DUE
As China Mobile expands services and smaller rivals China Unicom
<0762.HK> and China Telecom <0728.HK> prepare to launch their
preferred competing 4G technology, handset makers are bracing for
more surprises - with new product plans including Apple's widely
expected bigger-screen iPhone.
"Right now, what we've seen is just a small part of the users who
want to upgrade to 4G," said Lu. "The broader set of consumers, the
relatively mainstream ones who want a large screen, are still
waiting for the iPhone 6. So when that comes, the effect on high-end
brands like Samsung will be even bigger."
Kang at Counterpoint also said an iPhone with a large screen would
"go directly into Samsung's territory" and Samsung may respond with
something unique, such as a curved display.
Apple is confident it can gain further traction in China thanks to
its relationship with China Mobile and an army of some 150,000
Chinese developers making apps for the local App Store.
"They continue to do the roll-out," Apple Chief Financial Officer
Luca Maestri told Reuters this week, referring to China Mobile's 4G
network. "They continue to add points of sale, they're starting to
do more marketing activities, so we think we have a really good
runway in front of us with China Mobile."
(Reporting by Beijing Newsroon; Additional reporting by Edwin Chan,
Christina Farr in SAN FRANCISCO and Tony Munroe in SEOUL; Editing by
Miyoung Kim and Ian Geoghegan)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright
2014 Reuters. All rights reserved. This material may not be
published, broadcast, rewritten or redistributed. |
