Apple Needs China More Than It Does Verizon

China Is Way to the World

China’s size in the broader handset market dwarfs its dominance in smartphones. According to Gartner, manufacturers sold 1.22 billion handsets in 2008; 180 million units went to China, putting its market share at about 10.6 percent. For comparison, sales in North America were 49.1 million units; and for all of Europe, the Middle East and Africa, 229.5 million. Whether measured by just smartphones, the iPhone’s category or all handsets, China is Apple’s must-reach market.

Nokia is the market share leader in China, with 37 percent market share, according to Gartner. The next five: Samsung, LG, SEMC, Motorola and ZTE. By comparison, Apple's iPhone is a black-market device without a carrier. It’s a big market to be shut out. For example, a single carrier, China Mobile, ended 2008 with over 630 million subscribers, which is twice the entire U.S. population.

Apple has talked to carriers in China, but struck no deals—at least none publicly revealed. But there are deals, and there are deals.  “China is an important market for Apple, but pricing is crucial as operators don’t subsidize mobile phone in this market,” Anshul Gupta, Gartner’s principal analyst for Mobile Devices, told eWEEK.

Gupta cautioned Apple not to take practices from India to China. “In India, iPhone was launched at $650, and it was locked to operator for life,” he said. “An iPhone bought from Airtel will not work on Vodafone and vice versa. At first, the price was high and, secondly, the phone was locked in a market where consumers are not used to such conditions and change operators frequently.”

Going into China, Apple would be a niche player, which would be a decided disadvantage if iPhone prices are too high and uncustomarily locked to carriers. “Very high prices need a justified return in this competitive market where there are multiple finger touch devices at multiple price points,” Gupta said.

Joe Wilcox is editor of Microsoft Watch.