CELLPHONES: Apple Steals China Smartphone Crown

Bottom line: Apple’s surge in fourth-quarter China sales owes to its iPhone 6 release and growing relationship with China Mobile, though it could have trouble retaining its new crown as the nation’s top smartphone brand.

iPhone sales zoom in China

Skeptics who thought Apple (Nasdaq: AAPL) might be losing its luster in China might have to rethink that theory, following release of a new report that says the gadget giant grabbed the title of China’s biggest smartphone seller for the first time ever in the fourth quarter. That surprising result came as Apple released new quarterly earnings that showed China sales also surged 70 percent in its latest quarter, more than double the pace of its global revenue growth.

The surprising China surge comes as Apple works closely to address Beijing’s concerns about national security risks and the privacy of Chinese iPhone users, issues that reflect one of the continuing challenges it will face in the market.

While challenges will always remain for anyone doing business in China, the huge benefits from selling into the world’s largest mobile market were on prominent display in the quarterly reports from Apple and from research house Canalys. China is the world’s largest mobile market with some 1.3 billion subscribers. It’s also the world’s largest smartphone market, with shipments likely to rise 20 percent to top the 400 million mark last year.

The country’s list of best selling brands was topped for most of the last 2 years by global leader Samsung (Seoul: 005930), though homegrown high-flyer Xiaomi had taken over the title recently. But now the previously slipping Apple has come roaring back, topping the list of top selling smartphone brands in China for the first time ever in the fourth quarter, according to Canalys. (Chinese article)

There aren’t any actual sales figures in the report, but it adds that Apple was followed on the list by Xiaomi, and that Samsung and homegrown telecoms giant Huawei took third and fourth places, respectively. Canalys also provided its own brief comments, calling the surge for Apple remarkable since the company’s phones are all considerably more expensive than comparable models from its rivals.

The iPhone sales surge isn’t hugely surprising, since Apple launched its latest models in China in October and would typically expect to post its strongest sales for the first few months afterwards. What’s more, the company was also helped by its recent new alliance with China Mobile (HKEx: 941; NYSE: CHL), China’s leading telco with 60 percent of the market. Smartphone aficionados whose desire for larger screens might have previously prompted them to buy other brands also finally had a chance to choose Apple, as it rolled out its first ever such iPhone model, also known as a phablet.

Apple’s own data from its latest quarterly results was equally upbeat, showing its China sales grew 70 percent on a big jump in iPhone sales. (English article) The company’s global revenue grew by 30 percent to $74.6 billion, and it’s fairly safe to say that China was one of the biggest drivers of that larger figure’s growth.

An executive said China was Apple’s second largest iPhone market in the quarter, despite some analyst forecasts that China could overtake the US to become the company’s biggest market. He also commented that Apple hasn’t seen any slowdown in China sales for the iPhone 6 or iPhone 6 Plus in the current quarter, hinting that the company is stealing share from others, most notably the slipping Samsung that operates in a similar niche.

All of the upbeat news comes as separate reports earlier this week said that Apple has agreed to let Chinese government inspectors audit all of its new products being released in the market, in a bid to address their concerns about national security and user privacy. (previous post) Such concessions may look slightly worrisome on the surface as they hint at conflict; but in reality they could also be a positive sign, showing Apple is slowly succeeding in a bid to improve its sometimes contentious relationship with Beijing.

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