Apple not doing well in China

Some corners will have you believe that Apple’s next success story will be making piles of cash from behind the bamboo curtain.

After all, Apple has managed to sign some deals with Chinese telcos and it would appear that the nation is happy to queue outside one of its stores to buy the latest gizmo, just like in the West.

But figures in from Reuters show that the Chinese are slower to buy into the Cupertino dream than Apple might have hoped.

While Apple’s share of China’s booming smartphone market has risen sharply in the past two years, the company is getting a kicking from home grown suppliers.

Part of the problem is that Chinese network technology can’t support iPhone and iPad capabilities, while other handset makers supply phones that support the various mobile standards used in China.

Apple’s biggest deal is with China Mobile, with over 600 million subscribers, but that may not have the matching technology in place commercially until late 2012 or 2013.

Apple has decided that the numbers are big enough in the higher-end segment for it to make a killing out of China without having to drop its prices too much. But Apple’s insistence that the Chinese pay full price has meant that local phone makers can easily copy what the iPhone does and sell it for a fraction of the price.

But Apple’s traditional rivals are cleaning up. Samsung’s market share has more than quadrupled over the same period.

In addition, Apple has to cope with a black market of iPhones and sales of fakes.

In the third quarter, Huawei overtook Apple as the number three smartphone vendor in China. Now it trails Nokia Oyj, Samsung and Huawei, which all have a wider range of products targeting various segments of customers.

Apple could actually use its name to make a killing.

It could put out a China-only 3G iPhone at a quarter of the cost of the normal one. Since most Chinese would not pay more than $300 for a smartphone Apple could stick it in at that price point. Of course, that is too logical for Apple which is keen to keep its reassuringly expensive moniker even when it does not make good business sense.

It already tried, and failed, to carry out its current business model in Russia, so why it is doing the same thing in China is anyone’s guess.