Apple posted significant declines in its sales last week for the first time in 13 years, the lion’s share of those losses coming from its Chinese market-share.
Ever the optimist, CEO Tim Cook cited the declining value of the Hong Kong Dollar against the US Dollar as the major factor for his company’s struggles lately in China; however, others might point to the litany of practices that China employs to minimize Apple’s presence, with protectionist policies transforming products with comparatively Cadillac price-tags into veritable Porsches that you have to donate a kidney to afford.
The chief beneficiary of this uneven playing field has undoubtedly been Xiaomi, whose low-cost phones have swamped the Chinese market and beyond, while carrying none of that awkward “supporting western imperialists!” aftertaste to ruin the experience for domestic consumers. Then, there is the government smear campaigns aimed at turning public purchasing opinion against international technology brands.
Apart from taking great “inspiration” from Apple’s products (and its culture, branding, and even its packaging practices), Apple’s major competitor has tailored its version of the Android operating system to have a more “Apple-like” look and feel (at a fraction of the buy-in), while flooding the market with below-cost phones and profiting primarily from services and other value-added content. Why pay 5000-6000 RMB, when you can pay 700-1200 for a high-performance (albeit composed of low-cost parts) phone with tons of free services to boot? All while doing a service to your homeland, as public and civil society team up to trounce foreign competition?
Able to read the economic tea leaves, Apple previously attempted to edge into the content provision business. Yet, the Chinese government blocked Apple’s bid to reverse-engineer and deploy Xiaomi’s strategy by providing digital content through the iTunes store and offering its own payment service akin to Alipay and WeChat Wallet.
Chinese courts haven’t been on Apple’s side either. Last month, the company lost its fourth appeal in a bizarre copyright case against a Chinese technology company which markets its leather goods (such as mobile phone cases) with an “IPHONE” trademark.
In such a hostile environment, the amazing thing is that Apple ever managed to have a solid run in first place—testament to how unique its products and branding once were. The company’s thirteen years of remarkable sales may partially have been aided by the Chinese love-affair with Steve Jobs himself, and the brand of entrepreneurialism that has jived so well with adherents like Xiaomi’s own CEO Lei Jun.
Still, Tim Cook isn’t panicking, counting on the rising wealth of China to smooth over any bumps in the road in the long run. “The middle class (in China) is booming,” he said. “I could not be more optimistic about its future.”
By Christopher Ivan