With Proview in the Rearview, iPad Cruises Into China
Sixty million dollars have turned Apple's Proview problem into a distant memory, and now the company is free to sell its newest iPad in China. The country represents a major revenue opportunity for Apple not just in tablets, but in phones and other products as well. Meanwhile, however, competition from Google looms large.
Jul 11, 2012 5:00 AM PT
New data has been revealed about Apple's presence in China that firmly underscores the nation's importance to the iPad and Mac maker.
China accounted for about 20 percent, or US$7.9 billion, of Apple's revenues for its latest fiscal quarter, more than three times that of the same time a year before. When the company released its iPhone 4S to China in January, small riots broke out near the company's stores, forcing Apple to suspend retail sales.
The company's presence has the potential to grow as well. Apple has contracts with the second and third largest mobile providers in the country, China Telecom and China Unicom, but the Cupertino company still hasn't entered into a deal with China Mobile. A potential partnership with the world's largest wireless provider would give Apple the chance to dip into some of its 650 million subscribers.
But it's not the only rising U.S. tech presence in China. Google's Android is also making headway in the country. A recent report from Needham & Company showed that smartphone use on the whole is growing significantly in China, with shipments jumping 164 percent on the year. Android smartphones hold 69.5 percent of the market, with Apple taking 17.3 percent.
While Android may be grabbing a larger marketshare, though, Apple's ecosystem is securely in place, leading to better profitability, according to a recent report from Guohe Ad. The company reported that when Apple enabled RMB payment last November, its app store sales increased enormously in the following week. Android users in China are "significantly lagged" behind iPhone users in buying apps, said Neo Zhang, cofounder of Guohe Ad, especially because Android users are much less likely to pay for apps.
The company that is able to gain a power position in mobile apps in the country will have a significant advantage in the country, said Zhang, meaning that despite Apple's lack of marketshare in China, its presence is deep.
iPad Headed Their Way
Apple's China aspiration extend into tablets as well. The company announced Tuesday it will begin selling the newest iPad in China on July 20. The models available will be consistent with those offered in the U.S., as will the pricing.
Though Apple launched its newest iPad in March, China is receiving the tablet late because of a legal dispute over the iPad trademark. Proview Technology, a Shenzhen company, had previously sued Apple over rights to the iPad name in mainland China. Last week, the Cupertino company reportedly agreed to pay $60 million to Proview in a settlement, ending the drawn-out legal battle.
Apple reportedly withdrew its product line from the Electronics Product Environmental Assessment Tool (EPEAT) program last month, stating it would no longer qualify for the agency's ratings, which determine whether or not a product receives green certification.
The San Francisco Department of Environment responded by notifying its agencies that Apple laptops and desktops will no longer qualify for purchase with city funds, according to a report from The Wall Street Journal.
Apple appeared to have been making a general effort toward improving its green record recently, so the decision came as somewhat of a surprise to some environmental groups.
50 Shades of Green
Part of the reason for Apple's inconsistent green initiatives could be the response from the Silicon Valley community, Adam Lesser, analyst for Blueshift Research, told MacNewsWorld. The company is mindful about its clean power initiatives, he said, for instance by choosing to power its new North Carolina data center with solar arrays despite there being cheap coal and nuclear power in the state.
However, "With the decision to exit the EPEAT registry, it was likely a design decision having to do with the end of a lifecycle consideration and how the MacBooks are designed and built," he told MacNewsWorld. "I think there the company doesn't have to worry because folks in Silicon Valley are more understanding of how hard it is to design and innovate a computer, and are less concerned with those environmental standards."
While the move may irritate environmental advocacy groups, it's unlikely to shake up revenues at the company, he said.
"They'll lose some government purchasing and some academic institutions, but it'll amount to a rounding error, at best," he said.
The bigger result from Apple's withdrawal might be a greater discussion about narrowing the definition of a green product, said David Schatsky, founder and principal analyst at Green Research. Currently, the definition of an eco-friendly product is broad and thin. If those discussions proceed, Apple products would likely be a part of them, even if this version of the MacBook doesn't meet current standards, he said.
"This move may ignite a debate about the definition of a green computing product," he told MacNewsWorld. "It may drive discussion about how to define standards for newer categories of products like tablets and smart phones that are not currently addressed by EPEAT ratings and in which Apple dominates. Defining a standard there that excludes the market leader would make the standard less relevant than it otherwise would be."