Customers in line for the official opening of the new Apple Inc store in Shanghai on Friday. The company currently has three outlets in Shanghai and two in Beijing. Gao Erqiang / China Daily

Move underscores the tech titan's desire to expand further in China

SHANGHAI - Apple Inc, the world's top technology company by market value, opened its biggest official Asian outlet in Shanghai on Friday. The move underscores Apple's attempts to broaden its distribution channels and the huge market potential in the world's largest mobile-phone market.

More than 1,000 people lined up on East Nanjing Road, in one of Shanghai's central business districts, to await the 9 am grand opening of Apple's third store in the city and it's fifth in China.

The opening was not attended by company executives and no new products - such as the elusive iPhone 5 - were launched. However, that failed to deter dedicated Apple fans from attending and witnessing the tech titan gain another foothold in the metropolis.

Cui Lizhen, 27, flew into Shanghai on Wednesday from the Northeastern province of Jilin. Cui, who owns a start-up company, has been an avid user of Apple products for nine years and owns the full range of its devices.

"They all appear stylish and useful," he said, referring to the products as he stood at the front of a line that stretched for a hundred meters. "I wish they could open more stores in China, say in my hometown in Jilin, as the demand has, and definitely will continue to, surpass supplies."

The three-storey shop, which occupies nearly 1,000 square meters, displayed a bewildering array of products.

Zhang Yingda, the manager of the new store, said the company usually has superior "user experiences" built into every facet of its products, beginning with the packaging and ending with the internals that most people never see.

Apple has managed to become an extraordinarily savvy supply chain force. Its iPad has revolutionized the industry and ignited a tablet frenzy among computer companies. Meanwhile, the MacBook Air and the application-integrated iPhone have seen Apple become part of a huge and still-growing sector.

The company currently has three outlets in Shanghai and two in Beijing. It is set to open its first store in Hong Kong on Saturday, bringing the total to six in a region with the company's highest-grossing outlets.

While Apple is poised to expand its footprint across the country, market insiders said the decelerated opening of its stores has provided room for its rivals to flourish in the highly competitive smartphone segment.

However, the company claimed only 13 percent of China's smartphone market by shipments in the second quarter, following Nokia Oyj's 36 percent and Samsung Electronics Co's 15 percent, according to estimates from the researcher Gartner Inc.

Moreover, Apple is expanding at around a quarter of the pace it had previously targeted. Ron Johnson, a former head of retail, once said the company aimed to have 25 stores in China by February 2012.

In July, Tim Cook, recently appointed as CEO, warned that the company is only "scratching the surface" of Chinese demand after sales in the country surged six-fold to $3.8 billion last quarter.

However, Sun Peilin, an analyst with the domestic Internet research firm Analysys International, said Apple's moves suggest that the company is gradually adapting to the unique business environment in China and that increased cooperation with domestic telecommunications operators will boost sales.

"Apple's distribution network in China has a limited presence, forcing customers to buy from vendors not sanctioned by the company." Sun said.

Among the nearly 2 million iPhones sold in China, a large number were shifted through unauthorized channels, the so-called "gray market", Sun noted. "Now they are aware of the problems after years of operation. With two new openings in a row, these largely symbolic moves indicate that they have seriously stepped up expansion."

Sun also predicted that Apple will forge closer ties with China Mobile Ltd and China Telecom Corp Ltd.

"The upcoming generations of iPhones and iPads are likely to be compatible with upgraded 3G or even 4G networks that are supported by all telecommunications vendors," Sun said. "That will further remove the barriers for Apple's access to more users."

Bloomberg News contributed to this story

China Daily

(China Daily 09/24/2011 page10)