In China, screens a big issue for Apple

When it comes to smartphone screens, size matters for Xu Yinghong.

Shopping for a new handset in Beijing, the 25-year-old electrician was deciding between devices from Apple and Samsung Electronics. He was leaning toward the South Korean company’s Galaxy Note 3, with a 5.7-inch display, instead of the iPhone 5S that measures 4 inches.

“The screen is bigger,” Xu said at the Wanshanghui Saige Digital Mall in southern Beijing. “It’s more comfortable to look at if I’m watching videos or playing games.”

Apple is trying to boost its lagging share of the world’s biggest market by selling handsets through China Mobile’s 763 million users starting tomorrow. The iPhone maker faces challenges because many Chinese customers prefer to have one large-screen device for checking email, browsing the web and watching videos. Every other fourth-generation smartphone offered by China Mobile is at least a half-inch larger than Apple’s models.

The smallest 4G handset China Mobile sells is Sony’s Xperia SP M35t at 4.6 inches, which is 15 percent larger than the iPhones. The rest are larger than 5 inches.

About 40 percent of all devices using Google’s Android operating system sold this year through Chinese carriers will have screens measuring at least 5 inches, says Bryan Wang, principal analyst and country manager in China for Forrester Research.

“China is driving the demand for large-screen devices,” Wang said.

Samsung is the biggest maker of phones using Android, offering models at various prices. Early recognition of the appeal of large-screen devices helped Samsung win the lead in China, says Duncan Clark, chairman of BDA China, which advises technology companies.

“A model with a bigger screen is key to take on Samsung,” Clark said of Apple. “Just look at the popularity of the Note and other models with much bigger screens.”

Samsung captured 21 percent of smartphone shipments in China in the third quarter, compared with Apple’s 6 percent, according to Canalys. Samsung ranked first and Apple fifth, with three domestic vendors in-between.

Preorders for the iPhone have reached about 1 million units, China Mobile said.

Xue Yujiao, a 25-year-old computer consultant, bought a Meizu MX3 with a 5.1-inch screen this week because he was frustrated with his Lenovo Group’s handset’s 4-inch display.

“When I first bought the small one, all I did was talk on the phone, but now my demands are much greater,” Xue said in Beijing. “Now I watch a lot of movies on my phone, and the larger display is much better for that.”

Apple may introduce two larger-screen iPhone devices this year, Cleveland Research analyst Benjamin Bollin said in a Jan. 13 note. Carolyn Wu, a Beijing-based spokeswoman for Apple, declined to comment on whether the company has plans to release a larger device.

Apple, which counted on China for more than 15 percent of its sales last year, opened its 10th store in the country this month.

Screen size also matters in China because mobile phones often take the place of tablets, personal computers and televisions. Apple’s potential customer pool is limited by the cost of the iPhone, which is more than the equivalent of $700.

Chinese carriers don’t offer the same levels of discounts and subsidies that carriers in the United States do. China Mobile will offer a free iPhone only with its most expensive data plan, which is a minimum 588 yuan ($97) a month, it said Wednesday.

“Many consumers in China use smartphones as their first and primary device for multimedia content consumption due to a limited budget,” says Lydia Bi, a research analyst at Canalys. “Apple will find it hard to continue justifying the decision of not catching up with the screen size in most devices.”

The largest handsets sold by China Mobile include HTC’s 8088 and the Coolpad 8970L made by China Wireless Technologies, both featuring screens measuring 5.9 inches.

The release of the iPhone through China Mobile coincides with the weeklong Lunar New Year celebration, a period that generated $86 billion in retail sales last year, as consumers went shopping during the break using their annual bonuses. Apple cut the price of its iPhone 5S and 5C at stores in China and Hong Kong on Jan. 10 for a one-day sale.

Cook is counting on the agreement with China Mobile to boost market share and help trigger growth after its first annual profit decline in at least a decade.

Bloomberg