International Business & Economy Apple threatened by new phones from China

Apple threatened by new phones from China

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Investors are concerned that Apple Inc may have gone the wrong route in focusing too much on luxury phones, several of which cost more than US $1000. Mid-priced phone firms from China, such as Xiaomi, are providing Apple with stiff competition, especially in growing markets overseas, such as India, Russia, and Brazil.

Investors have been willing recently to ignore the fact that iPhone sales have dwindled, because of higher selling prices per unit. Apple said in the past that its revenues would rise due to Apple Music, iCloud, and other paid services, but this would require selling more units.

Analysts from Wall Street are concerned that lower iPhone sales will cause Apple to lose its smartphone market share since fewer people are buying Apple’s expensive phones, something that would slow down revenues from Apple services.

There are many phones in the market that are comparable to costly iPhones but are selling for around half the price, such as the OnePlus 6T, made by Chinese firm OnePlus.

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The chief economist for Apple shareholder Capital Investment Counsel, Hal Eddins, says, “You can get a lot of phone for a lot less. The phone landscape is rapidly changing and I think manufacturers are missing a trick by going the US$1,000 route.”

Apple, however, argues that its high satisfaction and loyalty rates make it stand out in the industry.

This does not mean that Apple is not threatened by three emerging smartphone companies from China, Xiaomi, Oppo and Vivo, who by Q1 and Q2 of 2018 have made up 25 percent of the global market, in comparison to 20 percent in 2017, and less than 9 percent for the whole of 2014.

Apple’s market share has not increased since 2015, and for Q1 and Q2 of this year, it holds 13.6 percent of the world market, which is down from 14.8 percent in 2014. However, sales tend to pick up in December, so full-year results remain to be seen.

Amongst the three Chinese smartphone companies, Xiaomi is rising quickly. Xiaomi is even stronger than Samsung in India, where it is the number one phone seller, and where Apple’s presence is small. Furthermore, Xiaomi is breaking new ground in Spain and in other parts of Europe.

For Q1 of 2018, Xiaomi took 30.3 percent of the smartphone market in India, and for Q2, it took 29.2.

In the US, Chinese phones are relatively still unknown, with the exception of OnePlus, whose 6T model is comparable to new iPhone models. The OnePlus 6T is now being sold at T-Mobile stores in the US, for US$549 (S$ 755), and according to the general manager for North America for OnePlus Kyle Kiang, first-day sales for this year were 86 percent higher than the previous model.

Apple also surprised its investors by announcing a sales forecast that is lower than expected for the rest of the year. While the new models are still in demand in rich countries, their high price tags are unaffordable in developing nations.

To combat this, Apple has sought to woo consumers by dropping the prices of old models, and saying that their units are built to have longer lives than other phones.

Chinese smartphone makers have in turn designed their phones with sleek, high end, high tech features that compete with iPhone’s pricey models.

Read related: Huawei’s Mate 20 Pro gives the iPhone XS Max and Galaxy S9+ serious competition

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