Apple has a huge win in China by launching its iPhone 13 but it wont last


Samsung and Apple dominate the charts of phone sales on the charts in North America but thats not the case in other markets. For instance, Samsung is less than one percent percentage of the market in China and Apple being South Korean giant overshadowed by its Chinese rivals. 

Apple is slightly better off with the iPhone company securing 13 percent market share in the quarter ended 2021, a year-on-year rise of 48 percent.

Apple finished Q3 as the 5th largest phone brand in China however the launch of the iPhone 13 turned the momentum to its advantage. In October, it became the most popular phone brand in China, beating out the top Android phones made by Xiaomi Honor OPPO and Vivo. 

The October sales numbers from Counterpoint demonstrate the extent of this feat with Apple increasing from a 13% share to a staggering 22 percent over the course of one month.

The release of iPhone 13 was the catalyst to the transformation, but it's not the sole primary reason. To learn more, I spoke to Ivan Lam a Senior Research Analyst at Counterpoint Research to understand whats happening. 

Lam says the increase of iPhone sale to 3 reasons the retail strategy getting rid of Huaweis decline , and the most all , aggressive pricing.

Kiranjeet Kaur an Associate Research Director at IDC APAC notes that Apple is positioned perfectly to fill the gap created by Huawei since it has a stronger image as a brand in the premium category (over 600 dollars) in comparison to its Android competitors. "In other words there is lesser competition for iPhone 13 series this year" Kaur said. Kaur.

Kaur stated that a different modification this year will be an "favorable pricing strategy" for the iPhone 13 that included launching the phone at a price lower that previously available iPhone 12 invigorating sales. 

The basis for this strategy was laid in the past year, when Apple began allowing phones to sell through online storefronts , which gives e-commerce stores the option of heavily subsidizing this year's iPhone 12 for this years sales season for the holiday season. 

Discounts that are attractive for iPhone 12 users iPhone 12 combined with aggressive pricing for the iPhone 13 created the ideal environment to sell Apple to sell its iPhones in China.

Counterpoints Lam suggests a waning market, with an ever-increasing median selling price (ASP) which , once more, favors Apple. 

The ASP for Q3 2020 was $314 , but it increased to $383 in the first quarter of 2021 and has remained steady all through the year. Android makers shift their attention to middle-range and premium segments to better meet the changing demands, however they do not have the acclaim that Apple has enjoyed.

 This makes it possible for Apple the iPhone maker to get over its Android competitors, says Lam.

The shortage of chips in the world has also led to lower sales for companies like Vivo the OPPO as well as Xiaomi and Android manufacturers not able to meet demand for their mid-tier and premium segment. Lam claims that Apple has been able to weather the shortages more effectively due to its size which played a role to the growth in sales that occurred in October.

However, can Apple keep its momentum going into 2022? Lam believes that iPhones will sell well in the coming two quarters since they are virtually unchallenged right now, however due to OPPO Vivo and Xiaomi set to unveil their flagships for 2022 in the next few months, this dynamic is likely to alter.

 While they aren't as well-known, their the realm of brand recognition, they're hoping to compensate for in price by launching flagship models that are expected to compete with those of iPhone 13 while offering better hardware.

OPPO and Vivo specifically can make use of their current offline distribution networks to attack. Both brands have control of over 70 percent of the market for offline and can leverage the advantage similar to what Samsung is doing in different markets. 

Xiaomi continues to make progress into the offline space, however Lam admits that it isn't as good as its BBK competitors. In regards to the current standalone Honor Lam says its offerings aren't as different from what's currently available and will be unable to distinguish itself by 2022.

As per Bloomberg Apple has already cut its estimates because of an increase in demand during the Christmas season. This is the main issue facing the Chinese market for smartphones which is a slowdown in sales overall. 

The figure of 75 million sales in the second quarter of 2021 was the lowest in the past decade and it's unlikely to change. "The entire market is plateauing; 5G is too costly with plans starting at $20 and the 4G market is fully saturated" Lam. Lam. "Chinese customers are also holding on to their phones for longer with upgrade cycles now averaging two years."

IDCs estimates suggest that the Chinese market slowed by 0.6 percent this year, with the tablet and PC categories experiencing higher demand. "The pandemic drove more demand for PCs and tablets than smartphones as smartphone penetration in China is already quite high" Kaur said. Kaur.

With the market becoming saturated it will be challenging for companies to differentiate their offerings. On the other hand, Apple has done an excellent job of capturing markets from Huawei however with Chinese manufacturers increasing their effort within the premium segment, they will likely see a rebound in the next quarters.

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