This seems to confuse some people, the author is not saying Apple have a monopoly on smartphones. What the author is talking about is the locked-in ecosystem that Apple owns, iOS and macOS (watchOS/tvOS).<p>> Moreover, the advantages go beyond margins: the best way to understand both Apple’s profits and many of its choices is to understand that the company has a monopoly on not just MacOS but even more importantly iOS. That means Apple can not only capture consumer surplus on hardware, but developer surplus when it comes to app sales; that some apps are not made is deadweight loss that Apple has chosen to bear to ensure total control.<p>The problem that Apple is having in China is that WeChat is the driving "platform" ecosystem, not the OS or the brand.<p>In other words, people aren't buying iPhones for its integration with Apple services in China, which could lead to an increase in growth due to the halo effects. Instead, they run WeChat and they buy things through there, which leads to no growth in Apple's services and revenue. Which also means, the customers have no desire to buy another Apple device. They can do the same on any device that can run WeChat.<p>If Microsoft sells a Windows Phone with WeChat as the default app for everything, they may have a hit in China but it would not be a sustainable hit because again, WeChat can run on iPhone or Android or any other OS.
Chinese people want the Apple brand they don't care about iOS. If iOS was the status symbol it would get pirated and installed elsewhere. Apple has a strong brand because of it's history as a premium device company internationally, that's all. Their brand was their first mover advantage in China but now Chinese companies are closing that brand gap and since WeChat rules the software side Apple is going to have a hard time being a big player until it can differentiate itself on something other than brand.
The problem with many tech analysts is that they are Apple fanboys without even knowing that they are. Stating that Microsoft Surface and Samsung S8 are not competitors of Apple just because their products don't run Mac OS/iOS is pure fanaticism at the very least.<p>Nevertheless, I find that the main point of the article is right. But Apple's China problem is also a very important problem for Google (actually, it's worse for Google).
There's a question under which people discuss what would happen if WeChat is blocked from AppStore on a Chinese quora like Q&A site Zhihu.[1] Tencent removed a tipping the author feature from WeChat because Apple wanted a share from the tips, which made the blocking worries more realistic than many people may think.<p>The people on Zhihu, possibly the richer and more knowledgeable among the Chinese internet users, supported WeChat, which is a vital tool for work as well as everyday life. It's an IM, and when every relative and friend uses it, it's not possible to switch overnight if Apple actually blocks it. What's more, its only competitor in China is another product of Tencent, QQ.<p>So, Apple is facing a huge China problem, and it's trying to solve it. However, it is yet unclear if it can solve it, or be solved by it. I think the walled garden policy actually backfires in China. Android, as an open platform, is not that easy to kill, even though all Google services are blocked here. However, iOS can. Without a big enough market share, it will die like IE6, without Chinese developers willing to write apps for it.<p>[1] <a href="https://www.zhihu.com/question/58776977" rel="nofollow">https://www.zhihu.com/question/58776977</a>
In the US at least, most of the phone is paid for by monthly installments as part of the plan so a phone which might sell for nearly $1K elsewhere appears to cost only $200 here. That has helped Apple immensely.<p>For my needs living in NYC with tall buildings, with need for good signal, voice quality, I use yearly iPhone upgrade on Verizon network. Verizon buys the $1K iPhone and I pay them back at less than $1.50 per day.<p>iPhone platforms have greater security than Android based ones and that is important to me as well.<p>The iPhone - Mac integration is great and minimizes complexity making my daily life easier.<p>Also, where I live, there are many Apple stores including a 24/365 for service for a device which is essential for my work.<p>I've had iPhones for 4.5 years and in that time period I've had to replace the phone 3 times for various reasons. Walking into the store for replacement is great.<p>But other people use phones for different reasons and most don't have the same constraints that I have.<p>Apparently WeChat in China makes the platform generic for most.
There should also be an article entitled, "China's Apple Problem." The article could go many different directions, but I like the contrast between the titles.<p>One thought is that it could investigate the impact of big tech firms capitalizing on the Chinese market from the top down and bottom up. Utilizing cheap labor and manufacturing facilities to develop extremely expensive products which are then sold almost exclusively and at a higher relative price to the upper echelons of Chinese society.<p>It could also focus on intellectual property concerns which are acting as a catalyst for overhauling the Chinese intellectual property system, court system, and marketplace.
In India, dual SIM support is the best advantage Android has over iPhone. That holds many people away. People are not letting ONE of their number go away.
One thing Apple has totally messed up in the Chinese market is localization. When I read Apple advertisements or texts on macOS or iOS UI, I always feel it's some foreigners who just learned to speak Chinese, yet trying to use Chinese in creative ways. They are totally understandable, but just that.<p>I think this at least partially affects Apple's brand building in China.
Switched to Pixel XL when iPhone 7 came out and killed headphone jack. Last thing I want on a phone, more things to charge and worry about.<p>Quality takes may forms. Pixel camera is reviewed to be better and screen is legit sRGB and it charges in 15min and lasts 1.5 days vs iPhone 7.<p>I also think iOS is a steaming turd. As an app dev for both platforms, I'm amazed people don't see the integration Android has with Pixel and others.<p>Let's see them "innovate" no home button in iPhone 8 along with a curved screen.<p>For the record this is being typed on my iPad...
If the situation in China is similar to the situation in Brazil, then it is not a surprise Apple products aren't successful there.
Apple services here are very poorly supported and localized, and Apple products are too expensive compared to the relative benefit we would receive.<p>Why would you purchase a significantly more expensive device, with worse features, that sometimes don't work at all?<p>We still haven't gotten turn by turn directions in Apple Maps, for example.
The blog post completely misses the near total influence of the Chinese government. Yes, China is a different ecosystem and that has second order effects. But it's still important to get the direction of causality right.<p>In nearly every country around the world, Android phones are dependent on and dominated by the Google ecosystem. They aren't in China. Why? Because Google services are banned. So is Facebook. So are some of Apple's services. Even back when Google was cooperating with the PRC and trying hard for the local market, executives rightly or wrongly claimed that whenever their marketshare passed 30% regulators turned nasty.<p>Many, many foreign companies have poured resources into China and the few that have succeeded have generally done so on the strength of a global brand—such as Coke, LV or Apple. That doesn't mean that Apple's challenges in China are simply due to market forces though. China's decision to ban <i>all K-pop, K-dramas and other Korean media</i> over their recent missile defense system shows that much.<p>Simply put, WeChat violated multiple rules on Apple's App Store on its way up that have enabled it to act like the platform it does today. In any other country Apple would have simply refused to push non-compliant updates, but in China Apple faced the risk of being barred from the market entirely. Years later, WeChat is now so dominant that Apple would have to capitulate for market reasons alone.<p>><i>"WeChat is that, but it is also for reading news, for hailing taxis, for paying for lunch (try and pay with cash for lunch, and you’ll look like a luddite)"</i><p>That's just not true. Most lunches in China are not bought via WeChat. Even inside the 2nd ring road in Beijing, cash is very common.
> None of that lock-in exists in China: Apple may be a de facto monopolist for most of the world, but in China the company is simply another smartphone vendor, and being simply another smartphone vendor is a hazardous place to be.<p>Don't get that part. I live in Europe and sure a lot of people has an iPhone but I believe strongly that more people have an Android.<p>Doesn't Android have like 80% or more of the world market?<p><a href="http://www.idc.com/promo/smartphone-market-share/os" rel="nofollow">http://www.idc.com/promo/smartphone-market-share/os</a>
I don't know if most people really consider the OS to be that important anymore, as the author strongly believes. The Windows Surface Laptop is no threat to Apple because it doesn't run macOS. Samsung's smartphones are no threat to Apple because the phones don't run iOS.<p>Then he continues with the WeChat factor to explain the shrinking market share of Apple in China. If you consider China the trendsetter in tech, that doesn't bode well for Apple in the rest of the world. It's a clear example that an OS isn't that important anymore.<p>If, or better when, a platform similar to WeChat emerges in Europe or the US, Apple can't rely anymore on it's OS to sell high margin hardware like the iPhone or Mac. It's not just a China problem.
>Unsurprisingly, in stark contrast to the rest of the world, according to a report earlier this year only 50% of iPhone users who bought another phone in 2016 stayed with Apple:<p>At first, I was confused by this graphic. Then I realized that the author is dramatically misinterpreting it: the graphic actually means that 66.85% of phones purchased in 2015 were made by Apple and 50% of phones purchased in 2016 were made by Apple. So we actually have literally no information about Apple's customer retention in China from that graphic at all. (Unless I'm really reading it wrong?)<p>I wish journalism majors were required to take a stats class in college. Sigh...
So WeChat did what Java couldn't do: Build an abstraction that made OS irrelevant client side. I guess you could say that the browser has done this too, but not fully, I guess.
<i>In China, the most important layer of the mobile software stack is WeChat, not the operating system.</i><p>If true, then the next "killer app" is already here. Connie Chan's 2015 article lays out a very convincing case for this claim (<a href="http://a16z.com/2015/08/06/wechat-china-mobile-first/" rel="nofollow">http://a16z.com/2015/08/06/wechat-china-mobile-first/</a>). WeChat, or something like it, will soon spread to other markets. Surely, Apple executives understand this and are busy working on an Apple equivalent.
The most interesting part of this article is how big incumbent companies fail. Not by direct competition, but by a new product category/service that makes the current one a pure or irrelevant commodity.
The author's explanation for Apple's "China problem" is unconvincing to say the least:<p>> [...]behind local Chinese brands like Oppo, Huawei and Vivo. All of those companies sold high-end phones of their own; the issue isn’t that Apple was too expensive, it’s that the iPhone 6S and 7 were simply too boring.<p><i>Boring</i> - that's the explanation for a significant dip in sales? I would have expected a list of exciting design or features that Oppo, Huawei and Vivo are putting into their phones to steal customers from Apple, because historically their flagships have been equally 'boring'.<p>The "China Problem" is at the crux of the matter (title of the post), and the explanation is too hand-wavy for my taste. My default attitude to tech industry analysts is cynicism; I do wonder who exactly pays for such superficial analyses and what value do they get from them?
Don't forget that China has biggest and most competitive smartphone market in the world, both in specs and price. iPhone is kinda underwhelming in the past year.
<i>> Unsurprisingly, in stark contrast to the rest of the world, according to a report earlier this year only 50% of iPhone users who bought another phone in 2016 stayed with Apple</i><p>Interesting. This shows that Apple don't compete properly and only achieve high sales through monopoly. That probably explains their general nasty attitude to many things, and really sick lock-in mentality.<p><i>> None of that lock-in exists in China: Apple may be a de facto monopolist for most of the world, but in China the company is simply another smartphone vendor, and being simply another smartphone vendor is a hazardous place to be. To be clear, it’s not all bad</i><p>Why is it bad? Being "simply another smartphone vendor" is the right situation. What's bad are monopolistic markets.
> hardware differentiated by software such that said hardware can be sold with a margin much greater than nominal competitors running a commodity operating system.<p>Apple's hardware is not differentiated by software. Their creaking software is an ancillary requirement to use their excellent hardware. If their software was their differentiator then Hackintosh's would be more widely used. Secondly, OSX <i>is</i> a commodity operating system. Non-commodity operating systems would be things like VOS.<p>> The functionality is mostly the same, and if users value a sustainable advantage in the user experience Apple deserves the profits — and power — that follow.<p>Sorry to be a dickhead but you shouldn't throw terms like "sustainable advantage" around like they're literal terms, when they have a very precise meaning in literature and research going back nearly half a century. Sustained Advantage specifically relates to Corporate Strategy and industry competition and is completely unrelated to user experience and whether or not a company "deserves" profits; advantage in an industry implies value accrual regardless of whether it's deserved or not. Nice UX might arise from functional level strategies, which arise from business level strategies, but otherwise they're unrelated concepts and it's not something the user should be aware of.<p>Misuse of terms leads to them being confusing and meaningless (e.g. Disruption).