Apple is having a hard time in China and knows it.
Once Apple’s biggest cash cow, China is now a major headache for the Silicon-Valley-based tech giant. Apple has to take bigger strides to succeed in a market that has proven to be one of its most challenging.
Apple’s trouble in China is reflected in a string of statistics. Its earnings in Greater China have fallen for five consecutive quarters since the beginning of 2016. The Chinese market contributed USD 46 billion to Apple in 2016, down 25% from the previous year, and is no longer the biggest market for Apple in terms of total revenue.
According to IDC, a market intelligence firm, iPhone sales in China dropped 26.7% to 9.6 million shipments in the first quarter of 2017. At the same time, in the global market, that number saw a slight increase.
Apple’s struggles in China have pushed the company to adjust its policies in the market. Their push includes the launch of a massive Apple Pay promotion, the development of a new iCloud data center in China, and the appointment of a new China head in July.
First, Apple tried to please Chinese consumers by launching its first massive Apple Pay promotion in China. During the one-week promotion that started on July 18, Apple Pay users were able to get a discount of up to 50% in dozens of convenience store, supermarket, restaurant, and shopping mall chains. Apple’s promotion saw tens of thousands of users piling into those stores to get discounts.
Apple’s payment promotion is regarded as its attempt to catch up with Chinese rivals Alipay and WeChat Pay, which dominate the online payment market in China.
According to Analysis, a market data agency, Alipay and WeChat Pay occupy 53.7% and 39.5%, respectively, of China’s third party mobile payment market, while Apple Pay’s market presence is less than 1 %. Apple Pay obviously has a long way to go.
Another of Apple’s initiatives involves a USD 1 billion investment in Southwest Guizhou province. On July 12, the company announced that it would work with the Guizhou provincial government to build its first iCloud data center in China.
Part of the reasoning behind the establishment of this iCloud data center is that the Chinese government requires foreign companies to store their Chinese users’ data in the country. At the same time, the data center will improve Chinese users’ experience with iCloud’s service. Previously, Apple users in China suffered from extremely slow and sometimes broken connections to their data backup in iCloud.
Furthermore, Apple is reportedly abandoning its policy around in-app purchases after it received fierce backlash from Chinese app developers and netizens. It has been reported that Apple will no longer demand apps to use in-app purchases to enable customers to ‘tip’ digital content providers.
Before Apple published the controversial policy, app users were able to tip digital content providers with Alipay or WeChat Pay. Now, users are forced to use Apple Pay’s in-app purchase, from which Apple gets 30% of every tip.
Many believe that tips do not constitute an in-app purchase because the money goes to third-party digital content providers instead of app developers and, therefore, tips should not be required to use in-app purchase.
Some apps have chosen to comply with Apple’s domineering policy, while others, including the popular SNS app, WeChat, have chosen to defy it by eradicating the tip function altogether.
If Apple is going to call off the policy as reports claim, many people will certainly be delighted.
Apple’s other important policy shift is the assignment of a new head of Apple in China.
On July 18, Apple announced that it would name Isabel Ge Mahe, born in Shenyang, China, as Apple’s Managing Director of Greater China. It will be the first time that Apple has named such a role in China, a move which proves the company’s strong commitment to the market.
According to Apple, Ms. Mahe’s previous efforts involved the development of China-specific features for the iPhone and iPad, including the recently announced iOS 11 features like QR Code support and SMS fraud prevention.
After Ms. Mahe assumes her new role later this summer, more localized policies may be rolled out.
(Top photo from sohu.com)