Why Apple Isn’t Biting Into China

Hewlett-Packard and its Watergate re-enactment now own the tech scandal headlines, but during the summer our attention focused on other alleged malfeasance, by the company with the normally shiny image, Apple Computer.

A British newspaper claimed that one of Apple’s contract manufacturers in China, Foxconn, owned by Taiwan’s Hon Hai Precision Industry, was mistreating its workers, through low pay, long hours, and poor living conditions. What went unreported from this saga was that we so rarely see headlines that contain the words “Apple” and “China.” Microsoft, Intel, Google — their ongoing conflicts with the Chinese government and the Chinese consumer are bread and butter for business and technology reporters in China. But Apple?

In Beijing, the best evidence that Apple exists is an iPod billboard that faces one of the city’s main arteries, and advertising during televised English soccer matches. There are quite a few iPods peeking out of people’s pockets, but when it comes to which laptops are being tapped upon at Starbucks, it’s HP, it’s Dell, it’s Sony, but except for foreigners, no Apple.

The fact is, when it comes to China, Apple as a computer manufacturer and retailer is nowhere.

The simple reason for this is that Apple is asking too much of Chinese consumers.

The biggest factor is price. Service, quality, prestige, satisfaction — these are extremely secondary concerns to the Chinese consumer. People bringing home US$400 – $600 per month are considered middle class in this country. They can afford to buy computers, and for them, price is the singular issue.

An Apple machine in China costs between double and four times as much as a competing Wintel box. The computer whiz kid down the street can build you a generic box with a pirated copy of XP for about $400. An entry-level Lenovo computer probably costs about 20 to 25 percent more, followed by foreign name brands. Apple is at least double the no-name box. So, one month’s salary to give your kid a computer and access to the Internet, or two months’? What would you choose?

The second reason is availability of software. In China, if you’re using Apple and you need software, you have to buy the legitimate product. For Apple, that means that their system is rejected, except by high-end graphic designers and die-hards. The cost of ownership of an Apple machine plus legit software to run on it is just too high for most people to consider.

Third is service. Until recently, having your machine break down was the thing that every Apple user in China prayed to avoid. Repairs are much more accessible now, but still there are only one or two authorized service centers in Beijing, whereas fixing a Windows box is far simpler.

Apple’s China strategy for its computers seems entirely different than for the iPod. While its music player is accessible, affordable, and increasingly ubiquitous, for desktop hardware it seems to be following Vertu, the luxury phone maker, instead of Nokia. Unless Apple chooses to address this market on its own terms, there won’t be any harvest for it here.

-Steven Schwankert, IDG News Service (Beijing Bureau)

Related Links:

• China Builds a Better Internet

• Apple Looks Into iPod China Sweatshop Report

• Apple Finds Few Violations at Chinese iPod Factory

• iPod Maker Cuts Damage Claim to 1 Renminbi

Check out our CIO News Alerts and Tech Informer pages for more updated news coverage.