Apple Claws Back in China

Even as China is one of Apple's hottest growth markets, the Mac maker is seeing some growth deceleration in the Middle Kingdom. Apple generated a record $8.8 billion in "Greater China" last quarter. The company needs to expand its retail footprint, but also continue making the iPhone more affordable to continue the upward trajectory.

Apple has made a lot of progress on the latter front, launching a series of initiatives to make devices more affordable. They seem to be working, as Apple just clawed back some market share in the first quarter.

According to Canalys, Apple is now the No. 5 smartphone vendor in China. The company fell to No. 6 during the latter half of last year amid increasing competition from Samsung and local OEMs, which aggressively target the low-end and mid-range market segments. Apple now claims 8% of the market, while Samsung enjoys a 20% share.

Canalys analyst Nicole Peng cited Apple's price cuts on older models as a contributing factor to its gains. Local players continue to dominate the market, though, comprising 68% of all smartphone shipments in China. Apple and Samsung are the only two foreign companies to score within the top 10.

China Mobile has also been aggressively pushing low-cost 3G phones, according to Peng. The results are showing, since the No. 1 carrier has been reclaiming 3G-subscriber market share and boosting 3G penetration. Samsung has been a beneficiary to China Mobile's initiatives, while Apple has yet to ink a partnership with the largest carrier in the world.

Even though Nokia recently launched the Lumia 920T free on contract on China Mobile, it still hasn't ranked in the top 10. Nokia's smartphone volumes in Greater China fell 63% year over year, to 3.4 million in the first quarter, so the partnership with China Mobile isn't doing it any favors quite yet. It doesn't help that there were reportedly supply shortages, too. While Nokia is fully able and willing to target the low end, Android remains the platform of choice in the region.

If Apple's recent affordability moves are already starting to pay off, just imagine what will happen when it really tries with the affordable model expected this year.

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Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and China Mobile. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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