Why China loves Apple

Jeongwen Chiang, Special to CNN

Updated
12:31 PM EST, Tue January 15, 2013

Apple staff welcoming customers in the new Apple store at WangFujin business district in Beijing on October 20, 2012.

Editor’s Note: Jeongwen Chiang is professor of marketing and chair of the department of marketing at China
Europe International Business School.

STORY HIGHLIGHTS

Apple CEO Tim Cook expects China to become the No. 1 market for the company

Jeongwen Chiang: Google or Facebook can only watch with envy

He says Apple mainly sells hardware, which doesn't run into censorship problems

Chiang: iPhones and iPads are also considered status symbols among elites
Apple CEO Tim Cook expects China, the world’s most populous country, to become the No. 1 market
for the company.

Equally heavyweight tech companies Google or Facebook can only watch with envy. It is not because
of lack of effort that they are nowhere near the success of Apple in China. Their businesses are just too
different.

The Chinese government’s tight control on freedom of information flow applies especially to the
Internet. Web access is filtered on a regular basis. Social media websites such as Facebook and
Twitter are blocked because the government deems them as potential hot spots for facilitating
politically sensitive or socially inappropriate content.

Meanwhile, Google is operational in China but has to route all searches to its Hong Kong site, and the
access is often interrupted. So, it is fair to say that the Chinese government is the reason why
companies such as Google and Facebook are not doing well in China.

Jeongwen Chiang

In contrast, Apple mainly sells hardware, so it has not run into any censorship problems.

Chinese consumers love electronic gadgets. Mobile phones are ubiquitous. Apple is doing incredibly
well because its products are so much more attractive and pricy. The iPhone quickly become a status
symbol product in Chinese social circles since its debut. Likewise, the iPad also joined the must-have
list as soon as it was launched.
Stay up to dateOpinion
on the latest opinion, analysis and conversations through social media. Join us at Facebook/CNNOpinion
AudioLive TV
and follow us @CNNOpinion on Twitter. We welcome your ideas and comments.

If someone wants to lubricate his “guanxi” – relationship – with an important person, these two
products are often the gift of choice. Before the iPad reached China, a businessman in Shanghai told
me that in the back of his car trunk, he had stocked at least 20 iPads, all bought in Hong Kong. “It is
the most-loved present for government officials,” he claimed.

The social pressure of having an Apple product is strong, especially as the wealthy elites set the trend.
If a middle class Chinese consumer cannot afford an expensive car or watch, sporting an iPhone may
be just as good. Even the bad press surrounding Foxconn, the main manufacturer of Apple products,
did not make too much of a dent on the company’s sales.

There is no doubt that China will be an important market for Apple in the coming years. Among the
three main telecommunications companies in the country, China Mobile is the only one without Apple’s
iPhone support despite the fact that it is the largest operator with nearly 700 million subscribers. Many
high-end China Mobile customers still stay in 2G network because China Mobile’s 3G network does not
have iPhones. If China Mobile gets its own version of iPhone, as rumor has it recently, then it would be
a shot in the arm for Apple.

RELATED VIDEO
Is Apple losing its appeal?

VIDEO

RELATED VIDEO
Is Apple's iPad Mini really worth it?

VIDEO

RELATED VIDEO
2011: Features of iPhone 4S

VIDEO

Interestingly enough, Apple’s growth in China is all from its hardware.

Its iTunes store sales from music, videos, books or apps downloads are almost negligible. This has
nothing to do with the government. There is no censorship of iTunes other than Apple’s own self-
screening mechanism.

Poor sales from iTunes store owe more to the fact that the Chinese are habitually reluctant to pay for
intellectual properties. To make things worse, there are so many websites that offer “jailbreak” tips so
that people can easily bypass Apple and get free downloads elsewhere.

There are rumors that Apple might consider adding a cheaper version of the iPhone for the Chinese
There are rumors that Apple might consider adding a cheaper version of the iPhone for the Chinese
market. In light of the fast growing smartphone market, cheaper phones seem to make sense
especially since there are still millions of Chinese who cannot afford a pricy iPhone of 5000 yuan
(roughly $800 dollars).

But Apple should stay away from the idea.

It does not make sense to sacrifice profit margin just for a greater market share. Doing so would
tarnish the premium image of Apple and erode the love and loyalty of the elites. One lesson that Apple
can learn is that not long ago, Nokia used to own the Chinese market but it became so popular that it
lost its appeal to the elites. Nokia ended up trying a new brand, Vertu, to entice consumers, but it was
not very successful.

By building more retail stores in China, Apple would certainly accelerate its growth. But the challenge
is to maintain its prestige so that consumers would not lose interest and crave for a new elite brand.

Apple might also want to rethink its iTunes Store business model in China so that it can generate sales
in other ways. Hardware comes and goes. One day, Apple products can and will be replaced. But
demand for books, movies, music, and apps is ongoing.

Will Apple find a way to tap into the Chinese consumption for content? We’ll just have to see.

Follow us on Twitter @CNNOpinion

Join us on Facebook/CNNOpinion

The opinions expressed in this commentary are solely those of Jeongwen Chiang.

Ad Feedback

Search CNN...

Log In

Live TV

Audio

World
 US Politics

Business

Health

Entertainment

Tech

Style

Travel

Sports

Videos

Features

Weather

More

Opinion

FOLLOW CNN

Terms of Use Privacy Policy Ad Choices Accessibility & CC About Newsletters Transcripts

© 2022 Cable News Network. A Warner Bros. Discovery Company. All Rights Reserved.

CNN Sans ™ & © 2016 Cable News Network.