Skip to main content

Why China loves Apple

By Jeongwen Chiang, Special to CNN
January 15, 2013 -- Updated 1731 GMT (0131 HKT)
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
September 1, 2014 -- Updated 1221 GMT (2021 HKT)
Carlos Moreno says atheists, a sizable fraction of Americans, deserve representation in Congress.
August 31, 2014 -- Updated 1625 GMT (0025 HKT)
Julian Zelizer says Democrats and unions have a long history of mutual support that's on the decline. But in a time of income inequality they need each other more than ever
August 31, 2014 -- Updated 0423 GMT (1223 HKT)
William McRaven
Peter Bergen says Admiral William McRaven leaves the military with a legacy of strategic thinking about special operations
August 29, 2014 -- Updated 1611 GMT (0011 HKT)
Leon Aron says the U.S. and Europe can help get Russia out of Ukraine by helping Ukraine win its just war, sharing defense technologies and intelligence
August 29, 2014 -- Updated 1724 GMT (0124 HKT)
Timothy Stanley the report on widespread child abuse in a British town reveals an institutional betrayal by police, social services and politicians. Negligent officials must face justice
August 30, 2014 -- Updated 0106 GMT (0906 HKT)
Peter Bergen and David Sterman say a new video of an American suicide bomber shows how Turkey's militant networks are key to jihadists' movement into Syria and Iraq. Turkey must stem the flow
September 1, 2014 -- Updated 1554 GMT (2354 HKT)
Whitney Barkley says many for-profit colleges deceive students, charge exorbitant tuitions and make false promises
August 29, 2014 -- Updated 1434 GMT (2234 HKT)
Mark O'Mara says the time has come to decide whether we really want police empowered to shoot those they believe are 'fleeing felons'
August 28, 2014 -- Updated 1432 GMT (2232 HKT)
Bill Frelick says a tool of rights workers is 'naming and shaming,' ensuring accountability for human rights crimes in conflicts. But what if wrongdoers know no shame?
August 29, 2014 -- Updated 0243 GMT (1043 HKT)
Jay Parini says, no, a little girl shouldn't fire an Uzi, but none of should have easy access to guns: The Second Amendment was not written to give us such a 'right,' no matter what the NRA says
August 30, 2014 -- Updated 1722 GMT (0122 HKT)
Terra Ziporyn Snider says many adolescents suffer chronic sleep deprivation, which can indeed lead to safety problems. Would starting school an hour later be so wrong?
August 29, 2014 -- Updated 1330 GMT (2130 HKT)
Peggy Drexler says after all the celebrity divorces, it's tempting to ask the question. But there are still considerable benefits to getting hitched
August 29, 2014 -- Updated 1849 GMT (0249 HKT)
The death of Douglas McAuthur McCain, the first American killed fighting for ISIS, highlights the pull of Syria's war for Western jihadists, writes Peter Bergen.
August 26, 2014 -- Updated 2242 GMT (0642 HKT)
Former ambassador to Syria Robert Ford says the West should be helping moderates in the Syrian armed opposition end the al-Assad regime and form a government to focus on driving ISIS out
August 27, 2014 -- Updated 1321 GMT (2121 HKT)
Ruben Navarrette says a great country does not deport thousands of vulnerable, unaccompanied minors who fled in fear for their lives
August 27, 2014 -- Updated 1319 GMT (2119 HKT)
Robert McIntyre says Congress is the culprit for letting Burger King pay lower taxes after merging with Tim Hortons.
August 26, 2014 -- Updated 2335 GMT (0735 HKT)
Wesley Clark says the U.S. can offer support to its Islamic friends in the region most threatened by ISIS, but it can't fight their war
August 26, 2014 -- Updated 2053 GMT (0453 HKT)
America's painful struggle with racism has often brought great satisfaction to the country's rivals, critics, and foes. The killing of Michael Brown and its tumultuous aftermath has been a bonanza.
August 26, 2014 -- Updated 1919 GMT (0319 HKT)
Rick Martin says the death of Robin Williams brought back memories of his own battle facing down depression as a young man
August 26, 2014 -- Updated 1558 GMT (2358 HKT)
David Perry asks: What's the best way for police officers to handle people with psychiatric disabilities?
August 25, 2014 -- Updated 1950 GMT (0350 HKT)
Julian Zelizer says it's not crazy to think Mitt Romney would be able to end up at the top of the GOP ticket in 2016
August 25, 2014 -- Updated 2052 GMT (0452 HKT)
Roxanne Jones and her girlfriends would cheer from the sidelines for the boys playing Little League. But they really wanted to play. Now Mo'ne Davis shows the world that girls really can throw.
August 25, 2014 -- Updated 2104 GMT (0504 HKT)
Kimberly Norwood is a black mom who lives in an affluent neighborhood not far from Ferguson, but she has the same fears for her children as people in that troubled town do
August 22, 2014 -- Updated 2145 GMT (0545 HKT)
It apparently has worked for France, say Peter Bergen and Emily Schneider, but carries uncomfortable risks. When it comes to kidnappings, nations face grim options.
ADVERTISEMENT