Apple made a subtle overture to China during its iPhone event on Tuesday as part of its long-term goal to win over the giant market. During a segment presenting the revamped Apple Watch, Apple COO Jeff Williams made a quick reference to WeChat, a messaging app popular in China. “Third-party apps like WeChat work over cellular as well,” he said while discussing the watch’s LTE features. Out of the more than two million third-party apps out there, Williams only called out WeChat.
So why did Williams bring up WeChat and not WhatsApp, another globally successful messaging app? Williams’ mention of an app popular in China and unfamiliar to many Americans was deliberate. Willy Shih, a professor of management practice at Harvard Business School who co-authored a case study on WeChat in 2015, says, “Of all the apps he could mention, why WeChat? Because every Chinese consumer that I know or have seen uses WeChat more than e-mail, more than texting. It is by far the biggest social media platform in China, so Apple has to play.”
This is far from the first time in recent memory that Apple has paid tribute to its third biggest global market, which is lagging only a few percentage points behind Europe. And it’s the second time Apple has linked its watch with the popular Chinese messaging app: in 2015, when the Apple Watch first launched, Apple exec Kevin Lynch demonstrated WeChat on it.
More recently, at WWDC this year, Apple demoed Siri translating English into Chinese with the phrase, “What are the most popular dishes in your restaurant?” Apple’s interest in serving China has also gone uncomfortably further than casual tributes. In July, the company removed several VPN apps from the iTunes store that helped netizens circumvent China’s internet firewall, citing a violation of local laws.
Although Apple seems to be courting China harder over this past year, its foothold in the country doesn’t reflect its efforts. Apple has gradually built up a presence in China since 2008, amassing 41 stores in a diverse range of provinces and not just in major urban hubs Beijing and Shanghai. But this year, the iPhone didn’t even make it to fourth place in popularity in China as locals favored domestic brand Xiaomi instead.
It’s not just Xiaomi that Apple has to compete against, but Huawei, Oppo, and Vivo as well, which came in first, second, and third in popularity this year. When the iPhone first came to China, in late 2009, one of these companies, Xiaomi, hadn’t even been founded yet, while another, Vivo, had just been created. In 2015, the momentum peaked, and China became the biggest driver behind Apple’s insane growth earnings.
But time has finally caught up to Apple in the Chinese smartphone market. Shih explains this is because Chinese brands have caught onto Apple’s game and are creating smartphones with an industrial design, fit and finish that are just as good as the iPhone, but at a lower cost. “Too many Chinese consumers feel they can get a good product without buying Apple’s premium priced product,” he says.
China’s domestic smartphone market growth explains Williams’ mention of WeChat during the Apple Watch presentation. Ever since the Apple Watch was announced in 2015, many said that it was a good match with Chinese tastes, since Apple is considered a top luxury brand. The smartwatch had a strong Q4 last year, reportedly selling six million units, which accounted for 80 percent of the global smartwatch market.
Following that strong holiday seasons quarter, Apple’s watch sales dipped. Apple sold 2.7 million Watch units globally during Q2 this year, lagging behind watch competitors Xiaomi, with 3.5 million units, and Fitbit, with 3.3 million units, according to Canalys. Apple is clearly eager to avoid falling behind local brands in the watch market the way it has in the phone game.
The market analyst firm forecasts that Apple’s numbers will be boosted by the Series 3 revamp later this year, and Williams’ namedrop certainly doesn’t hurt. And even as sales numbers fluctuate year-over-year, Apple’s CEO Tim Cook has reiterated his interest in pursuing China. Cook told CNBC last October: "From a longer-term point of view, out of the 90-day clocks and so-forth, we are very bullish on China.”