BEIJING — After weeks of anticipation by eager fans, Apple finally launched the iPhone 8 and iPhone X on Sept. 12, to mark the smartphone’s 10th anniversary.
The iPhone X not only sports a new look and an innovative full screen, it also features Face ID authentication, an OLED screen, enhanced performance for the CPU and other hardware and extended battery capacity. But, priced in China at a record high of 8,388 yuan, or nearly $1,300, a recent Reuters report questioned whether Chinese fans could even afford it.
Targeting a high-end market, iPhone has always been much more expensive than other brands. And as always, being the first to introduce a disruptive innovation in the traditional mobile phone market has been a secret of its success.
But Apple’s momentum as an innovation leader is diminishing, as is its market share in China. With a shortage of new features, the iPhone 7 was the worst-selling model in China in Apple’s history. According to the company’s financial report released in August, Apple's Greater China turnover has fallen 10%, making it the sixth consecutive quarter of sliding sales.
Meanwhile, domestic brands like Huawei, Oppo, Vivo and Xiaomi, with their latecomer's advantage, good-value prices and accurate grasp of segmented markets, are overwhelming their American rival in China.
Apple is seen as lagging in research and development.
The situation recalls China’s home appliance industry in the 1980s and '90s. Before the manufacturing boom of televisions, washing machines and refrigerators, Chinese consumers were forced to pay high prices for imported goods. But today Chinese brands such as Haier and Hisense have steadily improved, driving down the price of imported goods; they are also taking over markets in developed countries and are acquiring some existing brands overseas.
Apple is also seen as lagging in research and development. For example, Huawei invested $9.1 billion in 2015 and $11 billion in 2016 on R&D, or 15% and 14.65% of its operating revenue respectively, while Apple in 2016 spent $10 billion in R&D, or only 4.6% of its operating revenue.
Statistics from international firms like IDC, SA and Counterpoint show that in 2016, Huawei was in the third place globally, with about 10% of the 1.47 billion mobile handsets sold worldwide. In the second quarter of this year, Huawei was at the top of the Chinese market, with a 21% share, while Apple was in fifth place with a 7.1% share.
After years at the top, Apple has become arrogant. This is best illustrated by the 30% “Apple tax,” through which the American technology giant can take nearly one-third of "tips" that digital content creators like live streamers and online celebrities are paid by their fans through social media apps. The tipping function has become a booming economy among China’s smartphone users and Apple’s move has provoked an outcry.
Also, Apple's target market is young: In 2014, 77% of iPhone users were aged 15 to 35. But China’s population is aging and the population of over 60s is growing. In 2015, China had about a billion people aged 15 to 64, but this number is expected to drop to 990 million by 2020. With this trend in mind, Chinese manufacturers are altering their designs to appeal to a more mature public. Meanwhile, Apple, with its youthful designs, is at a disadvantage in China.
Apple’s success and almost 10 years of monopoly over the smartphone industry was based on its subversive designs. But as it gradually loses its advantage, the American giant will clearly need to endure the test of a Chinese market packed with alternative, less expensive products.
To turn the tide and win back its fading glory in China, Apple may need another Steve Jobs.
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