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 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.
September 15, 2014 -- Updated 1938 GMT (0338 HKT)
SEATTLE, WA - SEPTEMBER 04: NFL commissioner Roger Goodell walks the sidelines prior to the game between the Seattle Seahawks and the Green Bay Packers at CenturyLink Field on September 4, 2014 in Seattle, Washington. (Photo by Otto Greule Jr/Getty Images)
Martha Pease says the NFL commissioner shouldn't be judge and jury on player wrongdoing.
September 16, 2014 -- Updated 1315 GMT (2115 HKT)
It's time for a much needed public reckoning over U.S. use of torture, argues Donald P. Gregg.
September 16, 2014 -- Updated 1225 GMT (2025 HKT)
Peter Bergen says UK officials know the identity of the man who killed U.S. journalists and a British aid worker.
September 16, 2014 -- Updated 1128 GMT (1928 HKT)
Joe Torre and Esta Soler say much has been achieved since a landmark anti-violence law was passed.
September 12, 2014 -- Updated 2055 GMT (0455 HKT)
David Wheeler wonders: If Scotland votes to secede, can America take its place and rejoin England?
September 16, 2014 -- Updated 1241 GMT (2041 HKT)
Jane Stoever: Society must grapple with a culture in which 1 in 3 teen girls and women suffer partner violence.
September 12, 2014 -- Updated 2036 GMT (0436 HKT)
World-famous physicist Stephen Hawking recently said the world as we know it could be obliterated instantaneously. Meg Urry says fear not.
September 12, 2014 -- Updated 2211 GMT (0611 HKT)
Bill Clinton's speech accepting the Democratic nomination for president in 1992 went through 22 drafts. But he always insisted on including a call to service.
September 12, 2014 -- Updated 2218 GMT (0618 HKT)
Joe Amon asks: What turns a few cases of disease into thousands?
September 11, 2014 -- Updated 1721 GMT (0121 HKT)
Sally Kohn says bombing ISIS will worsen instability in Iraq and strengthen radical ideology in terrorist groups.
September 16, 2014 -- Updated 2231 GMT (0631 HKT)
Analysts weigh in on the president's plans for addressing the threat posed by the Islamic State of Iraq and Syria.
September 11, 2014 -- Updated 1327 GMT (2127 HKT)
Artist Prune Nourry's project reinterprets the terracotta warriors in an exhibition about gender preference in China.
September 10, 2014 -- Updated 1336 GMT (2136 HKT)
The Apple Watch is on its way. Jeff Yang asks: Are we ready to embrace wearables technology at last?
ADVERTISEMENT