CELLPHONES: Apple Holds China Smartphone Crown, CEO Opens Microblog

By newsdoug on May 12, 2015

Bottom line: Apple’s retention of China’s smartphone crown for a second consecutive quarter is partly due to timing, but also owes to CEO Tim Cook’s new PR campaign that will help to win favor from Beijing and the broader Chinese public.

Media are fixated today on a new report showing China’s smartphone sales fell for the first time in this year’s first quarter, in a development that shouldn’t surprise anyone due to the market’s supersaturation. But equally impressive in the report is the ongoing surge of Apple (Nasdaq: AAPL), which managed to hold onto its title as the nation’s leading smartphone brand for a second quarter after stealing the crown from the high-flying Xiaomi.

Some may say Apple’s surge is due to timing, since it released its latest iPhones in October, fueling a fourth-quarter sales boom that lingered into the first quarter. That may be partly true, though I personally have to applaud CEO Tim Cook for mounting a very focused campaign to woo both Beijing and average Chinese consumers. In the latest move of that campaign, Cook has just opened his official account on Sina Weibo (Nasdaq: WB), China’s equivalent of Twitter (NYSE: TWTR), as he moves to communicate more directly with customers in one of his most important markets.

Let’s begin with the big-picture news that saw China’s smartphone market shrink by 4.3 percent in the first quarter as shipments totaled 98.8 million, according to data tracking firm IDC. (English article; Chinese article) IDC is placing huge focus on this decline, noting it’s the first such drop in 6 years. Anyone who follows smartphones knows that the market was miniscule just 6 years ago, meaning that for practical purposes this is the first time that sales have really dropped in China, the world’s largest smartphone market.

The fact of the matter is that Chinese consumers are now bombarded daily with the latest smartphone offerings from a wide range of domestic companies that have jumped on this bandwagon over the last 2 years. The result is that the big majority of Chinese mobile subscribers have now purchased new models over the last couple of years, and will wait a while before trading up for a new model. Accordingly, the overall growth rate could continue to contract for another 2-3 quarters before returning to more sustainable modest growth as users trade up to 4G models.

Next let’s look quickly at Apple’s strong performance in the rankings, which saw its share of the market rise to 14.7 percent, ahead of Xiaomi and Huawei, which came in second and third with 13.7 percent and 11.4 percent, respectively. (English article; Chinese article) Fading former market leader Samsung (Seoul: 005930) came in at fourth, with 9.7 percent share. Apple had previously taken the China smartphone crown from Xiaomi in the fourth quarter, according to data tracking firm Canalys, which never provided any specific figures. (previous post)

We’ll wrap up this post with the reports that Apple CEO Tim Cook has officially launched his new microblog on the popular Sina Weibo service. (microblog account; Chinese article) The account contains a single post so far from May 11, saying “Hello China! Happy to be back in Beijing, announcing innovative new environmental programs”, plus the Chinese translation. Not surprisingly, it already has more than 400,000 followers just a day after its launch.

Cook opened the account the same day Apple announced a new environmental initiative to promote sustainable forestry in China, dovetailing with Beijing’s broader campaign to raise environmental protection awareness. (company announcement) Concurrent with the opening of his Weibo account, Cook gave an interview to Sina Weibo where he mostly talked about his company’s new environmental campaign in China.

The report points out this is Cook’s sixth trip to China, and his first interview with Sina, one of the country’s leading independent news outlets. I have to personally commend Cook for his efforts, which won’t cost much to Apple in monetary terms but will help it win valuable goodwill from both government leaders in Beijing and the general Chinese public.