Apple 2.0

Covering the business that Steve Jobs built

Apple falls to 4th place in the Chinese smartphone race

December 17, 2011: 4:37 PM ET

Slipping in a market Tim Cook identified as "an area of enormous opportunity" 

Thousands lined up for the iPhone 4S in Hong Kong. Image: Andrew Leyden.

There's a nugget of unanchored news in a report Reuters filed Friday.

"In the third quarter," wrote Lee Chyen Yee, "Huawei overtook Apple as the No.3 smartphone vendor in China."

Without identifying its source or specifying market shares, Reuters reported that Apple (AAPL) now trails Nokia (NOK), Samsung and Huawei, companies it characterized as more "nimble" and "flexible" than Apple.

"Nimble" is not what I would call Nokia, but it's true that Apple's failure to strike a deal with China Mobile (CHL), the world's largest mobile carrier (600 million subscribers), has hurt it.

When asked about China during Apple's most recent earnings call, CEO Tim Cook marveled at the scope of Apple's opportunity:

"In my lifetime," he said, "I've never seen a country with as many people rising into the middle class that aspire to buy products that Apple makes... The sky is the limit there."

He talked about how quickly China has risen to No. 2 in Apple's list of top revenue-producing countries. He talked about the investments the company has made in China. About the Chinese language online store it launched last year. About the six stores it opened in Greater China and the dozens more it wants to build. About its 200 mono-branded stores and its 7,000 points of sales.

But not one word about why Apple decided not to build an iPhone that could run on China Mobile's proprietary TD-SCDMA network -- and by so doing crack open an addressable market nearly three times the size of Verizon (VZ) and AT&T (T) combined.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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