3 moves Apple has to make in China

January 10, 2013: 6:58 AM ET

Apple has a relatively small presence in the country. That has to change.

121010045323-app29-apple-china-gallery-horizontalFORTUNE -- Could the second time be a charm for Tim Cook?

Apple's (AAPL) CEO is in China this week and has already met with Ministry of Industry and Information Technology head Miao Wei to discuss the country's emerging information and communications industry. For Cook, it was the second trip in 12 months. Last March, the chief executive toured Foxconn's facilities in Zhengzhou and Tianjin amid reports that the supplier had violated several labor laws.

Although Apple has not disclosed Cook's agenda for the trip, it's not farfetched to speculate that he's working on strengthening the company's relatively small presence in the country. This, despite the fact that China accounted for $5.7 billion in sales last quarter, a majority of the overall $7.5 billion it generated in the Asia-Pacific region that same time. (China is Apple's biggest market, second only to the U.S.)

MORE: How Tim Cook is changing Apple

Here are three things Cook must do to spur expansion there:

Open more Apple Stores. For a country with a population of over 1.3 billion, Apple's physical retail presence remains small. In fact, the company only has 7 stores -- 11 if you want to include Hong Kong. That makes for 1 store per 192 million people. In comparison, Apple Insider points out that the state of Pennsylvania has a total of 8 stores for a population of 12.7 million, or 1 store per 1.6 million people. Obviously, building out more retail locations would go a long way to raising the company's visibility there.

Saddle up with China Mobile. The world's largest mobile carrier still doesn't have the iPhone. China Mobile and Apple have reportedly been in talks for four years to come to an agreement, but haven't done so. According to Reuters, the two parties first said the biggest obstacle was a technical issue -- the Chinese carrier uses a unique 3G technology -- but now the sticking point is revenue-sharing. Some analysts predict that could change later this year when China Mobile rolls out its 4G Long Term Evolution (LTE) network. Apple can't afford to not run on China's largest mobile carrier. And China Mobile, which is losing 3G market share to the nation's second and third-largest carriers -- China Unicom and China Telecom -- needs the iPhone to buoy sales.

MORE: Can Apple win over China?

Make a cheaper iPhone. When we ran a post earlier this week arguing the case for a new, cheaper iPhone, some readers balked. After all, Apple has always priced its products at a premium. Then The Wall Street Journal all-but-confirmed that the company was working on one: an iPhone with a different shell of polycarbonate plastic. To nab more Chinese dollars, such a device may be key, as the average Chinese makes significantly less -- $8,000 a year in Beijing, by some estimates -- when compared with the average American. Sure, a cheaper iPhone abroad could be perceived by the U.S. as downplaying a premium brand, but to many Chinese, it would still be a hefty chunk of their disposable income.

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About This Author
JP Mangalindan
JP Mangalindan
Writer, Fortune

JP Mangalindan is a San Francisco-based writer at Fortune, covering Silicon Valley. Since joining in 2010, he has written on a wide array of topics, from the turnaround of eBay to the evolution of net neutrality. A graduate of Fordham University, Mangalindan has also written for GQ, Popular Science, and Entertainment Weekly.

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