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Summary:

Apple has doubled its share of the smartphone market in China in the last year. But it’s still really far behind Android — 70% vs 18%. Apple needs to do something about that. And the easiest way would be partnering with the world’s biggest carrier, China Mobile.

world-iphone

China is now the biggest smartphone market in the world, tech analyst Charlie Wolf of Needham & Co. reported in a note to clients on Monday. There were 33.1 million units sold in the last quarter alone, and Android is flat-out dominating those sales. With almost 70 percent of China’s smartphone market share, Google’s mobile OS is far ahead of Apple’s nearly 18 percent share. Nokia follows with 11 percent share this quarter. (Hat tip, AppleInsider.)

It should cheer Apple that since last year it has doubled its market share in China: In the same quarter a year ago its share stood just shy of 10 percent. But it’s very obvious that Apple needs to do something about its carrier availability in China — and fast, if it wants to compete with Android there.

The reason the iPhone grew so much in the last year, Wolf points out, is that the iPhone 4S finally became available to China Telecom’s 125 million subscribers in March. Apple also counts China Unicom as a partner, but the biggest mobile carrier in China, which is also the biggest mobile carrier in the world — China Mobile — still does not offer the iPhone.

Apple has to figure this China Mobile situation out, or its chief mobile competitor is going to continue to own China. It’s not an easy solution, however. It’s already been reported/rumored that Apple is planning to make the next iPhone compatible with China Mobile’s TD-SCDMA 3G network, which is different than almost any other 3G network on earth. As you may imagine, there are pretty important technical hurdles to that.

To make it work, Apple would need to add a specific radio to the iPhone just for China Mobile. Will Apple do that? It’s true that the company has been on a China localization binge lately, adding support for Chinese characters, as well as local search and sharing options for the region on iOS and on the Mac. But adding a separate radio is actually a huge deal. My colleague Kevin Fitchard has a really great explanation as to how hard — and expensive — it would be.

So what about localized hardware? Apple could decide to make a separate iPhone that specifically addresses this hugely critical market that runs on TD-SCDMA.

Either option would be totally out of character — Apple doesn’t make products targeted at a specific carrier or region. It’s why T-Mobile is still out in the cold here in the U.S. But with T-Mobile we’re talking about 33.4 million potential customers who might switch an buy an iPhone. With China Mobile we’re talking about 650 million potential customers.

China Mobile is the biggest mobile carrier in the world. The iPhone is Apple’s most important product. Apple has to figure out how to marry the two, especially if it has identified China as its most important market outside the U.S.

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  1. Josh Stubbs Monday, July 9, 2012

    “The MDM9615 and MDM8215 are designed to pair up with the WTR1605 … highly integrated radio transceiver with multi-mode (LTE FDD, LTE TDD, CDMA, WCDMA, TD-SCDMA, GSM) and multi-band support.” – http://goo.gl/DYd1s. So while there would definitely need to be a phone version that had the PA, Antenna and other components to support TD-SDCMA (and TDD-LTE for that matter) there is already a single chipset that would support all the bands. Apple has already done a different SKU to support 1x/EVDO for Sprint and Verizon and is using a Qualcomm cellular radio.

    1. Technically Apple can throw some design dollars and some extra supply chain management at the issue and it is a done deal.

  2. Derek Martin Monday, July 9, 2012

    There was a while there where the Sprint iPhone was a different hardware from the AT&T iPhone, so it’s not without precedent.

  3. China (and alot of 3rd world countries) are dominated by dual-sim phones. Apple simply can’t catch up the hardware evolution of the new worlds.

    1. Dual sim card phones?, you are out OS sync, that was a thing of the past.

  4. Two corrections:

    First of all Apple made a special CDMA version for Verizon. Is China Mobile bigger than Verizon? Yes. So Apple will make a special radio version for them, too. Not as big a deal as you think, although, as you correctly point out, a necessity.

    Second – Android market share is 70% but how many of those Android devices compete with the iPhone? The vast majority of Android phones sold in countries without subsidy – as they’re here in SEA where I live – are low end phones that cost between $100 – $200.

    No iPhone competes with these low end devices – not even the 3GS, which costs over $300. Maybe the 3GS will compete with these eventually but it’s clearly not where the massive margins come from.

    A much more meaningful statistic about China would be: How many $700 Android phones were sold vs iPhone 4S? And I think if you could get that statistic, you’d find the iPhone outsold Android by a solid margin.

    Just my observation on the street – low end Android phones are everywhere, which is unsurprising given that they’re the best and most iPhone-like phone you can buy for that little money. And most people who can afford an iPhone, have one. I see some higher end Samsung phones since last year on the streets, but they’re far outnumbered by iPhones.

    1. Agreed. Apple doesn’t compete with “buy 1, get two more for free” cheap Androids. They make all the profit, even with a “small” market share – which is also debatable, since Erica is comparing a free OS on hundreds of phones with three (3GS, 4, 4S) phones by one company.
      http://scottsscripts.wordpress.com/

  5. “Apple could decide to make a separate iPhone that specifically addresses this hugely critical market that runs on TD-SCDMA.”

    “It boils down to a simple business decision. Will these guys give me enough volume to justify the expense?”

    For 650 million customers, it seems like the answer would be yes.

  6. Michael Camilleri Tuesday, July 10, 2012

    Erica,

    Do you realise the fatal error you are making here? Apple vs Android…..It’s like saying Cisco vs Linux…..make son sense, right. Apple is a manufacturer of product (i.e. finished goods), whereas Android is a mobile phone OS which any manufacturer can adopt. It is totally non-sensical to compare the two.

    Try Apple vs HTC, that makes sense.

  7. Michael Camilleri Tuesday, July 10, 2012

    Apologies…that’s “makes no sense….”

  8. Michael Camilleri Tuesday, July 10, 2012

    Can you imagine what would happen if Apple made iOS available to any mobile phone manufacturer……Android would cease to exist almost immediately!

  9. Steve Jobs has been gone 9 months and you’re saying Apple has lost its innovation. I have a feeling that in the coming months you’ll see products which demonstrate that isn’t true at all (one of them likely being the new TV device).

  10. i don’t think so apple no need of this i think so

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