Receive free Lex updates
We’ll send you a myFT Daily Digest email rounding up the latest Lex news every morning.
Queueing in front of Apple stores on the day of a new model launch is a familiar ritual. But the long lines that formed in China when the latest iPhones and watches went on sale on Friday are more noteworthy than usual. They spell trouble for the US giant’s local rivals.
On the face of it, Apple’s competitors are in a strong position. The launch of the latest iPhone 15 comes at a challenging time for the company in China.
Rival Huawei has just released two 5G-powered handsets, its flagship Mate 60 Pro and the foldable Mate X5. The government is expanding a ban on iPhone use in some agencies and state-owned enterprises. Central government bodies have long recommended employees use locally made devices.
The stakes are high. China accounts for about a fifth of Apple sales. Tensions with the US over technology are a risk. So is the history of Chinese consumers showing patriotic support for domestic brands.
Yet Apple’s market share in China has been unexpectedly strong. It amounts to about a fifth of the local market. That is in line with Oppo and Vivo, the two most popular smartphone brands by market share. It is a third ahead of local electronics group Xiaomi.
More importantly, Apple recorded the biggest sales growth among all brands in China in the second quarter. This was despite iPhones being pricier than local counterparts and the absence of new model releases.
Shares of Xiaomi trade at 23 times forward earnings. That is a discount to global peers even after a 24 per cent boost in the past year. It has launched a premium line to distance itself from price wars among local makers. Yet margins remain razor thin, at just over 2 per cent last year.
No local brand has yet come out with a premium model that is a serious contender in the global high-end phone market. Moreover, iPhones are regarded as a status symbol among China’s youth. Until this changes, government curbs are unlikely to shake Apple’s grip in China.
