Apple Inc. (AAPL:US)’s falling market share in China is prompting thousands of local accessory makers to give more attention to products that fit mobile phones and tablet computers made by Samsung Electronics Co. (005930) and domestic rivals.
A shift to devices from Samsung, Lenovo Group Ltd. (992) and a widening array of Chinese makers offering cheaper handsets is pushing up costs for those that previously relied on the iPad and iPhone, said Vincent Kwok, chief executive officer of Guangzhou-based Magic Kingdom, a maker of protective cases.
Apple’s narrow range of devices made life simple for Kwok as he needed just one or two designs for its smartphones and tablets. As sales growth for the iPhone and iPad slumps in China, makers of accessories are being forced to develop products in a range of shapes and sizes to accommodate brands including Xiaomi Corp. and ZTE Corp. (000063)
“The market is now moving toward Samsung and brands from China, so we’ve enlarged our product line,” said Kwok, who has also added products from Xiaomi and Oppo. “Expanding our product line has reduced the risk for us. To focus on Apple is too dangerous.”
Apple’s share of China’s smartphone shipments was cut by almost half in the June quarter to 5 percent as Samsung holds the top spot with 18 percent, researcher Canalys said Aug. 9.
The iPad accounted for 28 percent of tablet shipments in the period, down from 49 percent a year earlier, researcher IDC said Aug. 21. Samsung surged to 11 percent from 6 percent a year earlier, while half of shipments were generated by producers with 1 percent or less each in market share.
Kwok, who used original designs and licensed art including Snoopy, has investing in new plastic moldings that cost as much as 20,000 yuan ($3,300) for each new model. At the same time, he faces lower prices as cases for cheaper domestic handsets sell for about a third of the 300 yuan paid for an iPhone cover.
For some producers like Giant Zhang, a co-founder of Beijing-based Jison Case, switching isn’t easy. Premium leather iPhone cases selling for more than 300 yuan aren’t popular with users of low-cost handsets, Zhang said.
“We sell for the iPhone because the price is higher,” Zhang said. “Phones from Xiaomi and Samsung sell at lower prices. We made some cases, but the sales were no good.”
Hans Han, CEO of Shanghai Stella Industry Co., said he’s worried about the future. After years of 25 percent growth that propelled the maker of Funway protective cases for the iPhone to $5 million in annual revenue, he faces higher costs.
Funway, which prints original cartoons of animals like owls and sheep on its cases, made no accessories for Samsung products two years ago. Last year, 30 percent of its sales were connected with the Suwon, South Korea-based company’s products, including cases for the flagship Galaxy S4 handset, Han said.
While Han still gets 70 percent of his sales from Apple products, he said he no longer relies on iPhones and iPads.
“Apple has no fresh ideas, no new designs,” Han said. “The market changes very quickly. If you don’t change, you will die.”
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