Please ensure Javascript is enabled for purposes of website accessibility

Apple, Inc.'s China Prospects Brighten, but Faces Hurdles

By Chris Neiger – Feb 19, 2014 at 3:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Apple made it on China's top 5 vendor list in the fourth quarter of 2013, but there's still plenty of work to do.

With China being the world's largest smartphone market, Apple (AAPL 4.86%) has long been interested in tapping more sales in the country. But recently the company has been losing market share in China to small -- but growing -- companies like Xiaomi. As recent data from IDC shows, Apple saw a glimmer of hope in the fourth quarter of 2013 with the company seeing its shipment market share jump from 6% to 7% sequentially.

Good, not great
The latest market share numbers, originally reported by The Wall Street Journal, are good for Apple but they aren't great.

On the upside, the company is back in the top 5 vendor category because of the iPhone 5s release. Launching the new model in China and the U.S. at the same time likely helped drive sales in the country. Apple investors should also be pleased with the fact that the latest market share numbers don't include shipments on China Mobile (CHL). Apple launched its phones on China Mobile's network in January and can use the network to boost its market share even further.

So what's not to like about this?

Apple is close to the bottom of the barrel when it comes to its place in the Chinese smartphone market, and it could be pushed out once again. Here's how the current market share numbers break down just for reference:

Company

Smartphone Shipment Market Share

Samsung

19%

Lenovo

13%

Coolpad

11%

Huawei

10%

Apple

7%

Xiaomi

6%

Source: IDC, via WSJ.

While Apple has made some gains, it's nowhere near dominating the Chinese smartphone market, and Xiaomi is right on its heels. Apple is historically very public about not caring about market share, but that doesn't mean the numbers are completely irrelevant, either. Market share shipments can be a good indicator of consumer preference in a country and helps gauge how well devices are received. While Apple's high-end devices won't sell as many phones compared to all of the cheaper smartphones on the Chinese market, investors obviously should still look for market share increases rather than decreases.

Apple's hurdles going forward will be in battling further against a market that prefers Android devices and fighting off China's smartphone rising star, Xiaomi. As I mentioned earlier, Apple is likely to boost its position in the country through its China Mobile deal, and some analysts have estimated the company could sell anywhere between 10 million to 30 million iPhones on the network over the year. That's a really wide range, so investors should keep a close eye on any news of how the devices are faring on China Mobile's network. Though China is the world's largest smartphone market, smartphone growth in the country is slowing. That means other vendors other than Apple will have to find new ways to grow as well.

For now, Apple investors should be pleased with the company's work in China, but there's still lots work to be done.

Fool contributor Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple. It also owns shares of China Mobile. 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.

Invest Smarter with The Motley Fool

Join Nearly 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Stock Quote
Apple
AAPL
$148.03 (4.86%) $6.86
China Mobile Stock Quote
China Mobile
CHL

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
349%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.