Apple pushing iPhone 4 in China to gain market share

The company had a 9 percent market share in this year's first quarter for the Chinese market, 10 percentage points behind Samsung

As rumors of Apple's budget iPhone continue to circulate, the U.S. tech giant has been pushing sales of its older iPhone 4 model in China as a way to grab market share in the nation's mid-tier market, according to research firm IDC.

Shipments to China of the iPhone 4 8GB version were up in this year's first quarter, increasing by 211 percent from the previous quarter, IDC said on Monday. Apple, however, ranked fifth in China's smartphone market with a 9 percent share, still far behind had market leader Samsung, which had a 19 percent share.

The company's latest smartphone, the iPhone 5, is still selling well, IDC analyst Teck Zhung Wong said in an interview. But lower-end Android models that cost consumers US$200 or less have been driving smartphone shipments to China, he added. The iPhone 5, in contrast, starts at US$859 when bought straight from Apple.

"What's happening here is that there's a flood of lower price Android phones available in China," he said. "Close to 90 percent of the shipments are Android, so Apple doesn't really have any competitive product at those lower price points."

China's smartphone market is soaring. Smartphone shipments in the country reached 78 million units in the first quarter, a 117 percent year-over-year increase.

To try and reach the China's mid-tier market, Apple is giving out financial incentives to its channel partners to push the iPhone 4, Wong said. One of these incentives includes offering partners better margins on selling the product, he added.

"I think this is a temporary measure. They [Apple] don't have a low-cost alternative at this point, so they are doing what they can," he said.

The 8GB model starts at $501 at the Apple store, but mobile carriers in the country like China Unicom are offering subsidized plans for the product.

Some analysts expect Apple to target the low-end smartphone market with a new budget iPhone device that will launch later this year. But IDC doesn't expect such a device to come so soon, but later in the future when it has the right components to support the device, Wong said.

Apple still remains one of the most popular brands in the country, now the world's largest market for smartphones. But demand for its iPhone is waning as cheaper alternative Android handsets, with high-end specs, are pervading China's market, Wong said.

"Consumers are questioning the need to pay a substantial premium for higher-end phones," he added. "Can they [Apple] convince the consumer to pay for the premium on their high-end devices? This is the big question."

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