Apple Still Needs to Bridge This Gap

From being the world's most valuable company to being dubbed "the King of Tech," Cupertino-based Apple (Nasdaq: AAPL  ) seems to have conquered it all. Well, almost everything -- if we ignore Samsung and the China factor.

Let's go behind the scenes and find out why the two are important for Apple for more reasons than one.

A Chinese story
With China having emerged as one of the most important overseas markets for Apple in recent times, what really worries me is that it has not only fallen behind Samsung in the Chinese business territory, but also that the gap seems to have doubled of late. Amidst all the hype about Apple's latest product release, let's not forget the fact that the maker of some of the world's most desirable devices actually ranks a distant fifth behind Samsung, the current market leader, in China.

Apple accounts for 7.5% of China's smartphone sales. For a country that's nearing 1 billion cellphone users, this is obviously not much, and this is even more obvious when compared to Samsung's market share of 24.3%. And others like Nokia (NYSE: NOK  ) , Huawei and ZTE have grabbed a place somewhere in between, something which I'm sure Apple doesn't appreciate. The one thing that seems to stand in the way of Apple's dominance in China is the nation's largest wireless network, China Mobile (NYSE: CHL  ) .

Why China Mobile
While Apple has successfully partnered with China Unicom and, more recently, with China Telecom, it has yet to offer its phones using the nation's top carrier, China Mobile. And when you consider China Mobile's staggering user base of 655 million -- a number almost the entire combined population of the U.S., Brazil, and Mexico, it sure raises eyebrows, doesn't it? Which brings us to this obvious question: What is stopping Apple from going ahead with China Mobile?

The answer lies in China Mobile's very own TD-SCDMA network, which Apple's iPhones do not support. And there are two ways to solve this: Either Apple waits for the carrier to roll out the next generation 4G LTE network, or it simply lies low until the launch of iPhone 5, which is supposed to possess a powerful chipset that supports multiple networking technologies. But the wait could prove costly, as the gap with Samsung could simply widen.

Foolish last words
Apple knows that the sheer size of the Chinese market makes it worth fighting for, even though it has recently become involved in an unwanted controversy there. Not to mention that its rivalry with Samsung is well known, with the two having filed a string of lawsuits against each other. What works in its favor is the sheer demand for its phones in China, which is evidenced by the 15 million China Mobile subscribers currently using unlocked iPhones. Imagine what would happen when the two officially get together -- great times for Apple, as usual!

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Fool contributor Subhadeep Ghose does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Apple and China Mobile. Motley Fool newsletter services have recommended buying shares of China Mobile, Apple, and Nokia; and creating a bull call spread position in Apple. 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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