Can Apple Fix Its China Problem?

For a market as important as China is to Apple (NASDAQ:AAPL), the literally cold start to sales on the iPhone 5 launch day in the country can’t be good news. The Wall Street Journal said Friday’s launch, coming on a snowy day, “was arguably the least eventful launch of an Apple device in the company’s four-year history” in Beijing, with hardly any lines of waiting customers. By comparison, the first day of iPhone 4S sales in January had sparked a near-riot after there was a delay in the opening of a retail store.

Apple’s Problem

Some have pinpointed Apple’s problems to a lack of partnership with China Mobile (NYSE:CHL), the world’s largest carrier by number of subscribers. The iPhone is currently sold through Apple’s seven retail stores in the country, authorized resellers, and through China Unicom (NYSE:CHU) and China Telecom (NYSE:CHA). But those two carriers together have fewer than half the mobile subscribers of China Mobile.

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“Apple’s market share declined because of the transition between the iPhone 4S and 5,” Nomura analyst Huang Leping told Reuters. “Their market share will recover (with the iPhone 5), but if you don’t have China Mobile, the significant market share gains will be very difficult.”

Apple has reportedly been in talks with China Mobile for four years, but technical and profit-sharing questions have not found mutually agreeable answers, leaving the issue hanging.

How Important is China?

Apple’s status in China as a high-end smartphone has meant that cheaper Google (NASDAQ:GOOG) Android devices offered by companies like Samsung and local manufacturers are making quite an impact. Apple’s ranking in China’s smartphone market slipped to sixth in the September-ending quarter, according to IDC. Samsung, Lenovo, and Chinese brand Coolpad held the top three spots. Apple’s China sales brought in $5.7 billion, about 16 percent of the company’s global total, but the company needs to realize its growth potential in the country.

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