China Telecom Corp began selling the iPhone last week as Apple tries to build on its 7.5 per cent share of the country's smartphone sales. Samsung controlled 24.3 per cent of the market for phones that can play videos and games, according to Gartner Inc, using a strategy of allying with all three of the nation's third-generation networks since such services started in 2009.
Models display Samsung Electronics Co Galaxy Nexus smartphones in Hong Kong. Samsung controls 24.3 per cent of the market in China for phones that can play videos and games, according to Gartner Inc, using a strategy of allying with all three of the nation 's third-generation networks since such services started in 2009.
Succeeding in China is important for Apple as shipments of smartphones in the country are projected to jump 52 per cent this year to 137 million units, overtaking the US for the first time as the world's biggest market. Unlike Samsung's strategy of partnering with all carriers, Apple has limited its own success by not making a device compatible with the nation's biggest operator, China Mobile Ltd.
"I don't expect Apple to replace Samsung any time soon," Gartner analyst Sandy Shen said in an interview. "China Telecom is the nation's smallest carrier, so the extent to which they can help Apple is quite limited."
The 16.8 percentage-point gap in China between Cupertino, California-based Apple and Samsung almost doubled from the third quarter. While Samsung is No. 1 and Apple No. 5 in China, the global story is different: Worldwide, Apple passed its Suwon, South Korea-based competitor to become the biggest smartphone vendor in the fourth quarter, according to Gartner.
China Mobile
Apple's partnerships with China's second- and third-largest carriers give it access to about 34 per cent of the nation's 988 million mobile users, while Samsung targeted the whole market. iPhones aren't sold to China Mobile's 655 million subscribers, a number almost equal to the combined population of the US, Brazil and Mexico.
"Having access to more subscribers gives vendors like Samsung an advantage," said Teck Zhung Wong, a Beijing-based analyst with IDC China, who forecast the 52 percent jump in smartphone sales this year. "If Apple is going to continue to grow in the Chinese market, it has to consider very seriously a handset with China Mobile."
China Telecom had a total of 129.3 million wireless users at the end of January, including 38.7 million 3G subscribers. Apple introduced the iPhone in 2007 in the US exclusively with AT&T Inc and added a second carrier partner last year in Verizon Communications Inc.
Pelting eggs
Apple chose not to make a phone with China Mobile because the operator had a unique 3G standard called TD-SCDMA, even after the Chinese company's Chairman Wang Jianzhou met with the then Chief Executive Officer Steve Jobs in early 2010. Wang told the company's annual meeting in May that he didn't expect Apple to introduce an iPhone until the carrier rolled out the fourth- generation TD-LTE network by end of this year.
China Unicom (Hong Kong) Ltd was the nation's first carrier to offer the iPhone with a service contract in October 2009. Even though Apple trailed Samsung, Nokia Oyj, Huawei Technologies Co and ZTE Corp in China's smartphone market, people still crave an iPhone.
Apple's oldest store in China was pelted with eggs from a crowd of customers on Jan. 13 when the shop, in Beijing's Sanlitun district, failed to open on the first day of sales for the iPhone 4S. After police sealed off the area to remove more than 500 people, Apple said it would suspend sales of iPhones at all its stores.
'Didn't bet high enough'
The maker of iMac computers and iPad tablets underestimated the "staggering" demand for the iPhone 4S when it started sales in China in January, Chief Executive Officer Tim Cook said. "We thought we were betting bold," Cook said Jan. 24. "We didn't bet high enough."
The iPhone 4S has been "an incredible hit" with customers around the world, Apple spokeswoman Carolyn Wu said in an e-mail. Apple "can't wait to get it into the hands of even more customers in China," Wu said, declining to comment further on the company's handset strategy in China.
Samsung's approach to China is "the same" as other markets, Juha Park, senior vice president of product strategy, said in an interview in Barcelona.
"We make product innovation and make our brand very desired in the market," Park said. "That's what we do to become a major player. We have been doing quite strong growth in the China market."
Unlocked iPhone
Even without an agreement with Apple or a device that's compatible with its high-speed 3G network, China Mobile still has 15 million iPhone users, spokeswoman Rainie Lei said. Those China Mobile users buy unlocked devices and surf the web at slower 2G speeds, or else connect to Wi-Fi hotspots for a faster connection.
China Telecom projects that the iPhone will "significantly enhance its long term sustainable growth and value creation despite the short term pressure on its profitability," spokeswoman Lisa Lai said in an e-mail.
"For China Telecom, its 4S launch comes late and the low- hanging fruit may already be exhausted," said Lisa Soh, a Hong Kong-based analyst at Macquarie Group Ltd.
The egg pelting also resulted in Apple losing one advantage it had over Samsung -- its own retail stores stopped selling iPhones. Apple said at the time the move was "for the time being." Apple's Wu said the phones remain available through Apple's online store in China, and declined to provide an update on when the shops would resume sales of the devices. That leaves Samsung free to further widen its gap.
"It's just one country, but it's such a big market and its portion in the global market is huge, so Samsung is trying to act fast to capture the market," said Kim Young Chan, a Seoul- based analyst at Shinhan Investment Corp. "Dealing with different network standards will give them a pretty valuable competitive edge."
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