Asymco: Cracking the Chinese Code: Microsoft vs. Apple

In 2011, Microsoft CEO complained that China’s market revenue accounted for only 5% of that in the U.S. However, Apple CEO predicted that in the near future, China’s market revenue will surpass that of the U.S.

The contrast becomes even more stark when considering the time and effort both companies have spent in the Chinese market: Microsoft has been investing and branding in China for at least 10 years, while Apple had done very little of that three years ago.

The details are shown in the following Apple regional sales chart:

Apple's fiscal sales revenue in China was only $769 million in 2009, but it reached $22.8 billion in 2012. The three-year growth in sales in China is almost equivalent to the 33-year growth in the United States.

The growth rate in 2012 was astronomical, exceeding 2010's 250% and 2011's 350%. Although Apple's growth rate in the Chinese market declined to 83% in 2012, it was still twice the average of the United States and the world. The following is a graph of the growth rate:

I made a prediction for future growth: China will slow down to 50%, and the United States will slow down to 20%. If my prediction is correct, China will become Apple's largest market in the world in 2016, as shown below:

The reason for this growth is, of course, the iOS product line. Every time a new version of the iPhone and iPad is launched and an update is released, growth starts to soar.

Let's continue to focus on the comparison between Apple and Microsoft. China and the United States have roughly the same number of PCs, but when it comes down to it, China's mobile users exceed those of the United States. With such a huge user pool, Apple's growth scale only reaches 30% of the distribution of mobile communication network users.

However, without a mobile product portfolio, Microsoft's development is seriously hindered. Of course, Microsoft has been working hard and has made many attempts, such as bringing WP phones to Chinese users. This is a difficult marketing because Microsoft must achieve it through partners. Microsoft needs operators to give licenses to operate the system, marketers to integrate these devices, and retailers to promote these devices to users. Given the flood of Android systems, Microsoft even has a difficult time at the beginning of the long journey.

But more fundamentally, Microsoft's software licensing business model is quite limited in China because it cannot realize its true value. Whether on the PC side or the mobile side, the value in China must be real and tangible. Software can only generate value if it can influence hardware purchases and become a part of the overall hardware purchase. Microsoft used the launch of Surface to prove that it is familiar with this value. But what is the significance of this value to WP phones?

199it Compilation and Analysis: Mu Ming via: asymco