Skip to main content

Why China loves Apple

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

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

(CNN) -- 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
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.

Become a fan of CNNOpinion
Stay up to date on the latest opinion, analysis and conversations through social media. Join us at Facebook/CNNOpinion 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.

Is Apple losing its appeal?
Is Apple's iPad Mini really worth it?
2011: Features of iPhone 4S

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 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.

ADVERTISEMENT
Part of complete coverage on
updated 12:15 PM EDT, Sun July 27, 2014
Megan McCracken and Jennifer Moreno say it's unacceptable for states to experiment with new execution procedures without full disclosure
updated 1:28 PM EDT, Sat July 26, 2014
Jeff Yang says it's great to see the comics make an effort at diversifying the halls of justice
updated 11:55 AM EDT, Sat July 26, 2014
Rick Francona says the reported artillery firing from Russian territory is a sign Vladimir Putin has escalated the Ukraine battle
updated 2:22 PM EDT, Sun July 27, 2014
Paul Callan says the fact that appeals delay the death penalty doesn't make it an unconstitutional punishment, as one judge ruled
updated 6:25 PM EDT, Thu July 24, 2014
Pilot Robert Mark says it's been tough for the airline industry after the plane crashes in Ukraine and Taiwan.
updated 11:10 AM EDT, Fri July 25, 2014
Jennifer DeVoe laments efforts to end subsidies that allow working Americans to finally afford health insurance.
updated 11:33 AM EDT, Sat July 26, 2014
Ruti Teitel says assigning a costly and humiliating "collective guilt" to Germany after WWI would end up teaching the global community hard lessons about who to blame for war crimes
updated 8:45 AM EDT, Fri July 25, 2014
John Sutter responds to criticism of his column on the ethics of eating dog.
updated 9:02 AM EDT, Fri July 25, 2014
Frida Ghitis says it's tempting to ignore North Korea's antics as bluster but the cruel regime is dangerous.
updated 2:50 PM EDT, Fri July 25, 2014
To the question "Is Putin evil?" Alexander Motyl says he is evil enough for condemnation by people of good will.
updated 2:03 PM EDT, Thu July 24, 2014
Laurie Garrett: Poor governance, ignorance, hysteria worsen the Ebola epidemic in Sierra Leone, Guinea, Liberia.
updated 9:49 AM EDT, Thu July 24, 2014
Patrick Cronin and Kelley Sayler say the world is seeing nonstate groups such as Ukraine's rebels wielding more power to do harm than ever before
updated 6:05 PM EDT, Wed July 23, 2014
Ukraine ambassador Olexander Motsyk places blame for the MH17 tragedy squarely at the door of Russia
updated 7:42 AM EDT, Thu July 24, 2014
Mark Kramer says Russia and its proxies have a history of shooting down civilian aircraft, often with few repercussions
updated 2:53 PM EDT, Thu July 24, 2014
Les Abend says, with rockets flying over Tel Aviv and missiles shooting down MH17 over Ukraine, a commercial pilot's pre-flight checklist just got much more complicated
updated 9:17 AM EDT, Thu July 24, 2014
Mark Kramer says Russia and its proxies have a history of shooting down civilian aircraft, often with few repercussions
updated 12:37 PM EDT, Thu July 24, 2014
Gerard Jacobs says grieving families and nations need the comfort of traditional rituals to honor the remains of loved ones, particularly in a mass disaster
updated 10:13 AM EDT, Thu July 24, 2014
The idea is difficult to stomach, but John Sutter writes that eating dog is morally equivalent to eating pig, another intelligent animal. If Americans oppose it, they should question their own eating habits as well.
updated 12:30 PM EDT, Wed July 23, 2014
Bill van Esveld says under the laws of war, civilians who do not join in the fight are always to be protected. An International Criminal Court could rule on whether Israeli airstrikes and Hamas rocketing are war crimes.
updated 10:08 AM EDT, Wed July 23, 2014
Gordon Brown says the kidnapped Nigerian girls have been in captivity for 100 days, but the world has not forgotten them.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT