Apple (AAPL) Has Problems in China, And It's Not Weak Demand...

August 24, 2012 1:50 PM EDT
Following up on Thursday's story that Apple (Nasdaq: AAPL) is losing it in China, research firm IDC all but affirms IHS data.

According to IDC, Apple's smartphone market share in China nearly halved to 10 percent in the second quarter, knocking it down to a fourth place slice of the pie. Samsung maintained its lead, with a 19 percent share.

Many buyers either aRE waiting for the next iPhone or switching brands, notes IDC. In Thursday's report, IHS said Apple had an issue with domestic wireless standards compatibility.

Lenovo took second place with 11 percent of the market, while local manufacturer ZTE was third.

Here's the basis of the problem: penetration. Data from Apple's 10-Q in July (its third-quarter 10-Q won't be released for another few days) show that Apple had about six stores in China, which works out to about one for 216 million citizens. That's a lot of associates. (Of course, actually 3G subscribers are much lower, something in the neighborhood of what the U.S. has.) Comparably, CNET noted that Apple has one store for 7 million in Massachesetts.

Either way, Apple needs to be successful in China if its growth trajectory is to continue. The company clearly has plans for more stores and increased competition between China Unicom (NYSE: CHU) and China Telecom (NYSE: CHA) should add for better subsidies and better distribution. Through China Mobile (NYSE: CHL), the world's largest wireless carrier, in there and subsidies are sure to drop.

Shares of Apple are up 0.7 percent on the session, having flattened on the week after getting to a new all-time high of $674.888 on Tuesday.

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