How Apple Captured China [Cha Minyoung's Post-it]

Apple's Q4 record 149 trillion KRW net sales... Surge in China from October despite Samsung struggles
Huawei's absence... iPhone 13 price cut marketing

iPhone 13 series [Image source=Yonhap News]

[Asia Economy Reporter Cha Min-young] #. In the fourth quarter of last year (Apple’s fiscal year 2022 Q1), Apple posted net sales worth approximately 149 trillion KRW, buoyed by strong performance in China. This marks Apple’s highest quarterly earnings ever. More than one-fifth of its total product and service sales came from the Greater China region, including mainland China. What is the secret behind Apple’s rise to number one in the “Chinese turf,” where Samsung Electronics has struggled?

On the 27th of last month (local time), Apple announced after market close that its net sales for the fourth quarter of last year increased by 11% year-on-year to $123.9 billion (about 149.11 trillion KRW). This is the highest quarterly revenue ever recorded, surpassing market expectations of $118.66 billion. Market research firm Canalys commented, “Apple reclaimed the top spot in the smartphone market after three quarters with strong performance from the iPhone 13,” adding, “It achieved unprecedented results in mainland China.”

The biggest contributor was undoubtedly China. In the fourth quarter, Apple earned $25.783 billion (31.2361 trillion KRW) in the Greater China market, up about 21% year-on-year. This was the steepest growth rate among the five global regions. Apple overcame concerns about economic slowdown in China and the US-China trade dispute. At the same time, the share of net sales from the Greater China market rose to 20.8%, up 1.7 percentage points from the previous year. This contrasts with a decline in net sales in Apple’s home market, Japan.

Signs of a big hit in China were detected from October last year. According to a November report by Counterpoint Research, Apple surpassed Chinese smartphone manufacturers such as Vivo, Oppo, Honor, and Xiaomi to take the top spot with a 22% monthly market share. Riding this momentum, Apple closed the fourth quarter with a 23% market share in China, securing the number one position in the Chinese market for the first time since 2015. During this period, smartphone sales in China fell 9% year-on-year, while Apple’s sales increased by 32%.

Q4 2021 China Smartphone Market Share. Source=Counterpoint Research

Counterpoint Research cited three main factors: the launch effect of the iPhone 13, the indirect benefits from US restrictions on Huawei, and early discount marketing for the iPhone 13. In particular, the iPhone 13 series released in September last year was highly praised. Apple lowered the price threshold in China compared to other countries by adopting a pricing strategy that reduced the retail price locally. The most popular iPhone 13 model in China was the base model (51%), followed by Pro Max (23%), Pro (21%), and Mini (5%). Due to overwhelming demand combined with a global semiconductor supply shock, some shortages occurred.

Samsung Electronics can no longer be complacent due to the strong performance of its competitor. Thanks to the iPhone 13, which sparked a boom in China in the fourth quarter, Apple reclaimed the global smartphone market share number one spot from Samsung after three quarters. Samsung’s market share in China remains in the 1% range, so low that market research firms classify it as “others.” This deepens Samsung’s concerns.

Foreign and domestic media are also focusing on the showdown between the two giants, Apple and Samsung. The key will be the flagship model competition this year. Samsung Electronics ended 2021 as the world’s number one smartphone maker, selling 72 million smartphones including the Z series and 7 million tablets in the fourth quarter. CNN Business reported, “Competition is expected to intensify this year,” adding, “Samsung is preparing for a major smartphone launch event on February 9, where the new Galaxy S series is expected to be unveiled.”

Apple decorated its Chinese homepage with 'tiger' emojis to celebrate the Year of the Black Tiger.

Apple is ramping up China-focused emotional marketing ahead of the Chinese Lunar New Year (Chunjeol), which begins on February 1. It has produced limited-edition AirPods Pro and short films titled “Shot on iPhone,” and revamped its Chinese website to celebrate the holiday. The moving tiger emoji symbolizing the Year of the Black Tiger (Im In Year) is not found on the Korean website.

However, there is some controversy. The English expression “Chinese New Year” used in the short film and website event page produced by Apple for the Im In Year 2022 marketing reflects a China-centric perspective. Professor Seo Kyung-deok of Sungshin Women’s University, who promotes Korean culture and history worldwide, launched a campaign on January 28 to change the English term for Seollal (Korean Lunar New Year) from “Chinese New Year” to “Lunar New Year.” Although the terms are often used interchangeably in the West, he argues that global awareness needs to change. Professor Seo explained, “Seollal is not a holiday exclusive to China but is celebrated by various Asian countries such as Korea, Vietnam, and the Philippines, so it is appropriate to use ‘Lunar New Year.’”