The 8 million iPhones that Apple sold in China last quarter are a lot like exotic pets: They’re cute and they make great gifts for rich young men to give to their girlfriends, but outside of their native ecosystem, their survival prospects don’t look very good.
The must have sentiment helps explain why China made up 20percent of Apple’s sales and fueled a 94 percent profit surgelast quarter.
Analysts and investors are excited by Apple’s performance in China, but predictions of the company’s sustained growth there are premature.
Apple will get another boost if the iPhone becomesavailable on China Mobile Ltd (941), the world’s largest mobile phonecarrier, with more than 660 million users.
Rather than use the laborious system that Apple designed (reminiscent of early Chinese input systems), many Chinese iPhone owners jailbreak their phones and install third party software that drastically simplifies the process.
It allows Chinese users to download any of the App Store applications for free and facilitates access to third party applications, which is important because applications designed specifically for China are few and far between in the App Store.
Music and movies also can be downloaded for free and shared with others on iPhone user forums.
Siri the most attractive new feature driving iPhone 4S sales does not work in Chinese and even struggles in English if you have a strong Chinese accent.
Finally, warranties are invalidated by the unlocking and jailbreaking, which is a good thing since 30 million iPhone owners would quickly overwhelm the six official Apple stores in China.
So Chinese users are cobbling together an iPhone experience from a variety of sources, and the overall experience is not very good.
The comment Tim Cook made to analysts recently suggesting that Apple is focused on delivering a phone with “off the charts user experience that customers want to use every day of their lives” sounds like pure hyperbole from the Chinese perspective.
The iPhone may very well be the best smart phone on the planet when it’s living in its own ecosystem, but its functionality and user experience quickly dissipate when it leaves its natural environment.
The stunning results of this impromptu survey prompted further investigation.
Apparently, a lot if not most of the new iPhone users in China are women, and many women we spoke to said they had acquired their phones as gifts from husbands or rich boyfriends.
For a gift that exudes exclusivity, functionality is secondary; slow downloads, sparse content, and kludgy fixes may not be important.
Maybe on the next quarterly call, Tim Cook will tell analysts that Apple is now focused on selling expensive fashion accessories.
Recently, when shopping for a phone in the United States, we were tempted by the large, vivid screen of the newest Samsung device.
Our investment in music and applications, the seamless interface with our other Apple products, our familiarity with the system, all ensure that we will not leave.
But in China, where users build their own structures (or opt to only superficially utilize the device), this lock in does not happen.
Chinese consumers are waiting for someone who understands their context to develop an ecosystem that makes smart phones easy to use.
This will mean more lower end phones reaching the Chinese market, resulting in price decreases.
It may be that local players like ZTE and Huawei (whose very functional smart phones cost $150) are best positioned to get this system right.
In any case, the winner certainly will not be a company that develops hardware, software, and an ecosystem from a US centric perspective.
With its recent explosion of sales in China, Apple looks like the dominant force in the global smart phone market.
Analysts expect China to continue leading the market given that the country already has 1 billion mobile phone subscribers, with only about 15 percent of them on the nation’s faster 3G networks.
Julia Macdonald is a business journalist based in Cairns, Australia. Julia 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. Julia 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.