China Airlines has operated the Hong Kong route since 1967, which is the airline’s most profitable market, generating 13.3% of its NT$121.9 billion revenue in 2006 with over 140 flights flown a week between Taipei, Kaohsiung and Hong Kong.
For the world’s most valuable technology to get a bigger slice of the China market, it will also have to come up with an iPhone that supports the biggest Chinese mobile carrier’s proprietary technology, settle an iPad trademark dispute and create more official sales outlets.
After the transfer of sovereignty of Hong Kong from the United Kingdom in 1997, and Macau from Portugal in 1999, these two special administrative regions have continued to have their own teams, which play as “Hong Kong, China” and “Macau, China”, respectively.
“We may not see a repeat of this year’s stellar pace of growth in coming years unless Apple comes up with great products to keep up with consumers’ demand and tastes,” said Candice Wang, an analyst with research firm Analysys International.
While share of Google’s (GOOG) Android platform approximately doubled in China during 2011 to reach unit sales share of 68.4%, Apple ended the year with but 5.7% market share.
Consumers with deep pockets generally see Apple as a premium product and status symbol, analysts say, and are willing to overlook certain drawbacks – such as that “Siri”, the iPhone’s voice enabled personal assistant technology, does not speak Chinese.
“we see everybody using an iPhone, so we decided to buy one,” said a user whose surname is Zhou, who lives in China’s wealthy coastal province of Jiangsu.
A basic iPhone 4S costs 4,988 yuan ($790), which is more than what many Chinese make in a month.
Even though Chinese salaries are on the rise, per capita urban disposable income was only 21,810 yuan ($3,500) in 2011, while per capita rural income was only 6,977 yuan.
For many Chinese consumers, the iPhone is out of reach and most have instead bought cheaper smartphones running Google’s Android operating system, from the likes of ZTE Corp’s.
ZTE’s U880 smartphone costs less than 800 yuan and the Coolpad 9930 model sells at 1,670 yuan.
“There is no doubt that Apple’s sales will keep rising, but market share is a different story,” said CK Lu, analyst at Gartner.
But the coffee house king’s overall same store sales growth slowed while guidance was shy of analyst forecasts, sending shares lower.
In this larger cell phone market, Apple grew its share from the last quarter of 2010 to the last quarter of 2011 by more than 100%, from 3.5% to 7.4%.
With China’s smartphone shipments expected to hit 137 140 million in 2012, exceeding the United States for the first time, according to research firms IDC and Gartner, the potential is huge in an country with more than a billion mobile phone users.
“we’ve tried out iPhone 4S and Lumia 900 and we personally feel that if one really wants to buy a handphone, iPhone 4S is the way to go,” Luo Wen, an Apple user based in the southern province of Guangdong, said in his microblog.
CLOCK TICKING ON CHINA MOBILE DEALApple is expected to sell 16 million smartphones in China in 2012, double 2011′s total mainly due to the addition of China Telecom as a carrier partner, IDC said.
China’s second largest mobile phone operator, China Unicom, posted a big jump in its first quarter earnings, helped by robust data demand, but one analyst tells CNBC he prefers the market leader China Mobile.
“The clock is ticking for both parties to get a deal done,” said Wong Teck Zhung, senior analyst at IDC.
“China Mobile might lose patience and decide to go for flagship handsets from other vendors while consumers, increasingly aware of non iPhone alternatives, might also just get tired of waiting.”.
Wong said chances of a deal would bump up significantly if the upcoming version of iPhone supported China Mobile’s 4G TD LTE and its proprietary 3G technologies, provided Apple uses one of Qualcomm Inc’s high end Snapdragon chipsets.
Hardly anywhere is Apple’s share so small, or so fast growing, as in the world’s largest smartphone market: China.
However, it has not launched its latest iPad product due to its lawsuit with a near bankrupt Chinese technology company called Proview International Holdings, which says it owns the “iPad” trademark in China.
That legal tussle is awaiting a ruling from the Higher People’s Court in Guangzhou.
($1 = 6.3060 Chinese yuan)(Additional reporting by Michelle Chen; Editing by Alex Richardson).
Phaedon George is a business journalist based in Hobart, Australia. Phaedon has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Phaedon spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.