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If you saw Tim Cook’s keynote last month, you may have noticed that China came up a lot. The presentation even opened with a video from Hangzhou.
Many commentators are saying that Apple’s focus is shifting from the US to China — but are they right? And what does it mean if they are?
Signs of a Shift
It’s not just Tim Cook’s presentation that gives us an idea that Apple is setting their sights on China. There are other signs. For example, the introduction of the gold iPhone and new gold MacBook. China has long been one of the major consumers of gold; according to Statista, it was close behind India for the top spot in consumer demand last year with 814 metric tons. The US was third with 180 metric tons. That’s less than a quarter of China’s demand.
We’re seeing a similar thought process with the Apple Watch. Do you know anyone who’s likely to drop $10,000 on an 18-carat gold smart watch? Probably not. But Apple could be betting on the higher-end watches’ success in the PRC. According to Time, “The Apple Watch’s biggest advantage in China is deceptively simple: few Chinese consumers laugh when Apple touts the device as a luxury item.”
The Chinese market is just more receptive to extremely expensive Apple products. Chinese consumers, the article goes on to say, are more likely to compare the $10,000+ price tag to other luxury watch brands, the median of which costs about $11,000. And because people are more concerned about the brand of their luxury items than the price or function, Apple has a big advantage because of its prestige.
It’s also been suggested that the larger screens on the iPhone 6 and iPhone 6 Plus could have been developed in response to demand from China. This is especially true of the iPhone 6+ and its massive screen. And meeting demand in China is a big deal: Time also reported that a rumored 36% of all iPhone sales are in China.
And although there hasn’t been much in the news about it this year, the end of last year saw reports of talks between Apple and China’s Alibaba, one of the world’s largest retailers, on a potential mobile payment partnership. And while that hasn’t yet come to pass, the two companies are reportedly very close.
China: Apple’s Moneymaker
As you can see in the graph below (originally posted on Seeking Alpha), China has become an increasingly significant part of Apple’s revenue stream. In early 2011, it was making about as much money as the rest of the Asia Pacific region. By mid-2013, it was starting to rival Europe (click the chart to enlarge it).
From 2011 to 2014, Apple saw a 234% increase in revenue, from 12.6 to 29.8 billion dollars, in China. And in the next chart, from Ommalik, you can see which it makes sense for Apple to keep its focus there. China’s growth has been massive and continues to outpace the rest of the world.
With Apple’s fiscal year 2014 revenue topping out at over $182 billion, $30 billion from China might not sound like a lot. But that’s still thirty billion dollars. And it seems clear that this number won’t be going down any time soon. In fact, it will probably keep rising.
Once you see these numbers, it’s clear why Apple is shifting their focus to China.
What Does It Mean?
So it seems pretty clear that Apple is shifting its focus away from the US and Europe and toward China and other Asian markets. What could this mean for consumers around the world?
First, we’re likely to see Chinese trends start driving Apple products around the world. Look at the gold iPhone and gold MacBook. In the UK, where I live, the gold iPhone is a relatively rare sight, as people here are generally understated in their tastes. But the gold iPhone remains available. Chinese interest and fashion is already making an impact on Apple products internationally.
Interestingly, it may also mean that we see an increased emphasis placed on China by other manufacturers, as well. If Apple dominates the Chinese market, they’ll have the best access to the reported 1.2 billion mobile users in the country, and that’s a big deal. China has the most mobile users on the planet, with India coming in second with 971 million (the US is third with 328 million). It’s a huge market, and companies that don’t place an emphasis on it could find themselves falling increasingly far behind Apple.
Samsung has already felt this; as cheaper handsets (and iPhone knockoffs) are becoming more common in China, and Apple’s stake in the higher-end devices grows, Samsung has started to be squeezed out of the middle. If they don’t find a way to cater to the tastes of China’s mobile users, they could be in trouble. And because it’s too expensive to develop many different phones for many different countries, Samsung’s handsets around the world could start to reflect Chinese taste as well.
Of course, there’s no telling what will happen in the Chinese market. While it looks to be going strong and like it will only continue to grow, circumstances may change, tastes may evolve, and Apple may decide to change its strategy. If things continue as they are, however, we could very well see the international mobile ecosystem driven by China and its purchasing power.
Only time will tell.
What do you think about Apple’s new focus on China? How do you think it will change the international mobile world? Or do you think it’s just business as usual? Share your thoughts below!
Image credit: Karlis Dambrans via flickr.