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 22, 2014 -- Updated 1259 GMT (2059 HKT)
You could be forgiven for thinking no one cares -- or even should care, right now -- about climate change, writes CNN's John Sutter. But you'd be mistaken.
September 21, 2014 -- Updated 2132 GMT (0532 HKT)
David Gergen says the White House's war against ISIS is getting off to a rough start and needs to be set right
September 22, 2014 -- Updated 1300 GMT (2100 HKT)
John Sutter boarded a leaky oyster boat in Connecticut with a captain who can't swim as he set off to get world leaders to act on climate change
September 22, 2014 -- Updated 1917 GMT (0317 HKT)
Ruben Navarrette says making rude use of the Mexican flag on Mexican independence day in a concert in Mexico was extremely tasteless, but not an international incident.
September 22, 2014 -- Updated 1359 GMT (2159 HKT)
Michael Dunn is going to stand trial again after a jury was unable to reach a verdict; Mark O'Mara hopes for a fair trial.
September 19, 2014 -- Updated 2322 GMT (0722 HKT)
Is ballet dying? CNN spoke with Isabella Boylston, a principal dancer at the American Ballet Theatre, about the future of the art form.
September 19, 2014 -- Updated 2147 GMT (0547 HKT)
Sally Kohn says it's time we take climate change as seriously as we do warfare in the Middle East
September 22, 2014 -- Updated 1927 GMT (0327 HKT)
Laurence Steinberg says the high obesity rate among young children is worrisome for a host of reasons
September 19, 2014 -- Updated 1302 GMT (2102 HKT)
Dean Obeidallah says an Oklahoma state representative's hateful remarks were rightfully condemned by religious leaders..
September 19, 2014 -- Updated 1922 GMT (0322 HKT)
No matter how much planning has gone into U.S. military plans to counter the Islamic State in Iraq and Syria, the Arab public isn't convinced that anything will change, says Geneive Abdo
September 19, 2014 -- Updated 1544 GMT (2344 HKT)
President Obama's strategy for destroying ISIS seems to depend on a volley of air strikes. That won't be enough, says Haider Mullick.
September 19, 2014 -- Updated 1303 GMT (2103 HKT)
Paul Begala says Hillary Clinton has plenty of good reasons not to jump into the 2016 race now
September 19, 2014 -- Updated 1501 GMT (2301 HKT)
Scotland decided to trust its 16-year-olds to vote in the biggest question in its history. Americans, in contrast, don't even trust theirs to help pick the county sheriff. Who's right?
September 19, 2014 -- Updated 0157 GMT (0957 HKT)
Ruben Navarrette says spanking is an acceptable form of disciplining a child, as long as you follow the rules.
September 19, 2014 -- Updated 1547 GMT (2347 HKT)
Frida Ghitis says the foiled Australian plot shows ISIS is working diligently to taunt the U.S. and its allies.
September 19, 2014 -- Updated 1958 GMT (0358 HKT)
Young U.S. voters by and large just do not see the midterm elections offering legitimate choices because, in their eyes, Congress has proven to be largely ineffectual, and worse uncaring, argues John Della Volpe
September 19, 2014 -- Updated 0158 GMT (0958 HKT)
Steven Holmes says spanking, a practice that is ingrained in our culture, accomplishes nothing positive and causes harm.
September 18, 2014 -- Updated 1831 GMT (0231 HKT)
Sally Kohn says America tried "Cowboy Adventurism" as a foreign policy strategy; it failed. So why try it again?
September 18, 2014 -- Updated 1427 GMT (2227 HKT)
Van Jones says the video of John Crawford III, who was shot by a police officer in Walmart, should be released.
September 18, 2014 -- Updated 1448 GMT (2248 HKT)
NASA will need to embrace new entrants and promote a lot more competition in future, argues Newt Gingrich.
September 16, 2014 -- Updated 2315 GMT (0715 HKT)
If U.S. wants to see real change in Iraq and Syria, it will have to empower moderate forces, says Fouad Siniora.
September 18, 2014 -- Updated 0034 GMT (0834 HKT)
Mark O'Mara says there are basic rules to follow when interacting with law enforcement: respect their authority.
September 16, 2014 -- Updated 1305 GMT (2105 HKT)
LZ Granderson says Congress has rebuked the NFL on domestic violence issue, but why not a federal judge?
September 16, 2014 -- Updated 1149 GMT (1949 HKT)
Mel Robbins says the only person you can legally hit in the United States is a child. That's wrong.
September 15, 2014 -- Updated 1723 GMT (0123 HKT)
Eric Liu says seeing many friends fight so hard for same-sex marriage rights made him appreciate marriage.
ADVERTISEMENT