The “Middle Kingdom” is the latest region of the globe to witness strong market penetration by Apple Inc.’s (NASDAQ:AAPL) products, and Chinese sales of iPhones and Macs have proven robust enough to startle even Tim Cook, at least in public. Apple’s success has also been a driving force in the expansion of 4G networks in China, providing a feedback loop that will improve the technical infrastructure and provide more opportunities for local electronics firms as well as Apple itself.
Skyrocketing profits as high as 28% above Q2 2014 were reported by Reuters as accruing to Apple (AAPL) in China. This is far ahead of the 6% average revenues generated globally by the U.S.-headquartered electronics company, highlighting the value of a Chinese strategy in keeping Apple’s margins expanding at a healthy rate. The Mac computer, which is a relative non-starter elsewhere on the planet, witnessed 39% higher Chinese sales in Q3 2014, according to Apple’s CFO Luca Maestri.
Competitor Xiaomi, which just launched its Mi 4 smartphone yesterday, has not yet gone head to head against the Cupertino titan. Though a struggle for market predominance between the two electronics firms seems inevitable, given the fact that both are experiencing powerful expansion in the Chinese market, the clash has not yet begun in earnest. Thus far, Xiaomi is busy trouncing other smartphone firms reliant on the Android platform, such as Samsung and Huawei.
It is even possible that Apple (AAPL) and Xiaomi may reach a kind of temporary equilibrium, in the same way that predators can share a habitat if they favor different prey. Xiaomi offers quality, budget smartphones, whereas Apple targets the more affluent end of the market where aesthetics and status symbols become as important as cost, and sometimes more so.
This may prove to be a knell for the already floundering Samsung of South Korea, however. Clearly, the Asian market is the place where the battle for smartphone market supremacy is going to play out in the immediate future.