At This Rate, Can Apple Ever Catch Google in China?

At This Rate, Can Apple Ever Catch Google in China?

Apple (NAS: AAPL) may have plenty of opportunity in China, but for now Google (NAS: GOOG) still reigns supreme.

According to figures from Beijing-based Analysys International, Android significantly grew its market share throughout last year, starting with a 33.6% slice and closing out the fourth quarter with a 68.4% smartphone share within the country. Meanwhile, iOS has wavered and ended with just a 5.7% market share.

Source: Analysys International.

Source: Analysys International.

Low-cost offerings from a slew of hardware OEMs have helped Android gain traction, including handsets from Asian manufacturers such as Samsung (which enjoys nearly a quarter of the market, according to separate estimates from Gartner), HTC, and Huawei, among others.

While Apple offers a higher-quality device, it comes with a heftier price tag that hinders Cupertino's ability to address the medium- and low-end markets. The 1,000 yuan price point is considered particularly important, while the newest iPhone 4S starts at 4,988 yuan. Even the older iPhone 4 and 3GS models come in at 3,988 and 2,888 yuan, respectively.

The 1,000 yuan segment is specifically the market that NVIDIA (NAS: NVDA) is targeting with its previous-generation dual-core Tegra 2 found in Android devices. NVIDIA CEO Jen-Hsun Huang mentioned it on the last conference call as one of his company's main growth opportunities in the near term.

Microsoft (NAS: MSFT) saw its share shrink to 1.2%, but Mr. Softy still has high hopes of toppling both iOS and Android within China as the company works to "drive the price down." With these digits, that's an order that's getting taller to fill every quarter.

It's not as bad as Research In Motion's (NAS: RIMM) 0.1%. Besides, RIM has enough problems to worry about right now. While 60% of its revenue last year came from segments other than Canada, the U.S., and the U.K., such as emerging markets, obviously that's not from China.

One aspect that may be holding back Apple with the iPhone 4S is that it shares the same physical form factor as its predecessor. The iPhone is the ultimate status symbol in China, but Chinese consumers exhibit what's been called "superficial consumption," which also affects purchasing patterns for other luxury brands.

This behavior is locally referred to as "mianzi" (loosely translated as "face") and ties into one's reputation, honor, and respect, which underscores the relevance of the iPhone as a status symbol since it adds to one's mianzi.

Since the iPhone 4S looks identical to the iPhone 4, there's less social incentive to make the expensive upgrade since no one can tell the difference. Apple is widely expected to introduce a redesigned iPhone this year, which would undoubtedly boost sales accordingly.

Apple is seldom the top dog when it comes to market share, but it's usually the king of the profit share.

Apple is definitely an American company set to dominate the world, starting with China. If you need more, here are another three on the house. Emerging markets are a key component to any portfolio, so don't miss this special free report.

At the time thisarticle was published Fool contributorEvan Niuowns shares of Apple, but he holds no other position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Google, Microsoft, and Apple.Motley Fool newsletter serviceshave recommended buying shares of NVIDIA, Microsoft, Google, and Apple, writing puts on NVIDIA, and creating bull call spread positions in Microsoft and Apple. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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