On Monday, Bloomberg reported that Apple’s iPhone 11 has been doing brisk business in the Chinese market since its release. Indeed, the site notes that the Big Tech firm shipped 10 million smartphones to the Communist nation in September and October. As such, the company has moved six percent more smartphones in the region than it did with the previous iteration.
Why Chinese Consumers like the iPhone 11
Given Apple’s recent declining performance in China, Sino consumers’ resurgent interest in the iPhone is a surprise. In the first and second quarters of this year, Apple lost market share to Chinese brands like Huawei and Xiaomi. The two firms have lured in buyers with premium handsets that offer more features for less money.
Furthermore, Huawei has used the ongoing U.S.-China trade war to position itself as the preferred brand of Sino patriots.
According to Bloomberg, however, Apple recently outperformed its rivals by building a better mousetrap. Indeed, the iPhone 11’s battery and cameras have won rave reviews from critics. Also, the corporation made the standard edition of its new handset $50 cheaper than the previous year’s model. In making those crucial hardware and pricing decisions, the manufacturer has reasserted its appeal in the world’s largest smartphone market.
Besides, Apple put a lot of effort into reigniting excitement for its products in China. In addition to its lower price, the firm also offered a lucrative trade-in program for users willing to make an upgrade. The company also gave Chinese purchasers the ability to buy a new iPhone with 24 interest-free monthly payments.
One Little Problem
Although moving more hardware in its second-biggest market is a positive development for Apple, there is one problem. In 2019, the electronics maker has made a big push to change its business model from one driven by device sales to one that is services oriented. Unfortunately, the Chinese government has banned many of the firm’s non-hardware offerings.
Years ago, the corporation’s leadership realized that the global smartphone market has cooled off significantly. Accordingly, it compensated by beefing up its highly lucrative service offerings. This year, Apple has introduced its own subscription video-on-demand-platform, a credit card, and a video game subscription service.
In the fiscal fourth quarter, the company generated $12.5 billion in services revenue. The corporation grew that segment of its business by 8.7 percent year-on-year because of Apple Arcade and Apple Card. In Q1 FY2020, the firm’s services division will bring in even more money thanks to Apple TV+.
Currently, Beijing’s ban on Apple’s subscription ecosystem means that its revenue growth potential in that market is limited. That said, the corporation did recently remove a mapping app used by Hong Kong protesters. At the time, the firm attributed the move to a request by local law enforcement. However, the iPhone maker might be in the middle of a more extensive campaign to get its services restored in China.
With billions in annual revenue on the line, Apple has a significant incentive to kowtow to the Chinese government.