Apple Plans Further Investment in China as Cook Visits

Apple Plans Further China Investment
Apple Inc. employees pump their fists in the air as they open the company's new store in Shanghai, China, on Friday, Sept. 23, 2011. Apple Inc. is currently has 5 stores in mainland China as it struggles to open enough stores to stave off competition of its popular iPhones and iPads. Photographer: Qilai Shen/In Pictures/Corbis

Apple Inc. said it plans to make greater investment in China as Chief Executive Officer Tim Cook visited the world’s most populous country, where store openings have trailed a forecast from the company two years ago.

Cook had “great meetings” with Chinese officials, Carolyn Wu, a Beijing-based spokeswoman, said by telephone yesterday, without identifying the people. Cook posed for photos earlier in the day with customers at Apple’s store in the Joy City Mall in Beijing’s Xidan shopping area.

China is Apple’s second-largest market after the U.S., Cook said in October. His visit comes almost three months after crowds threw eggs at another Apple store in Beijing’s Sanlitun district when it didn’t open on the first day of sales for the iPhone 4S. Demand for the iPhone in China was “staggering,” and the company “didn’t bet high enough,” Cook said Jan. 24.

“Apple has done a great job with the relatively small number of retail stores they have got here,’” David Wolf, CEO of Wolf Group Asia, a Beijing-based marketing strategy consulting firm, said in an interview yesterday. “The challenge now is to extend the successful retail model they have in the U.S. to China.”

Since opening its first store in Sanlitun in 2008, Apple now has two outlets in Beijing, three in Shanghai and one in Hong Kong, for a total of six. That’s fewer than the 25 stores that then-head of retail Ron Johnson projected over two years on Feb. 25, 2010. Johnson left Apple last June to become J.C. Penney Co.’s chief executive officer.

‘Greater Investment’

“China is very important to us and we look forward to even greater investment and growth here,” Apple’s Wu said yesterday, without providing further details.

Cook met yesterday with Beijing Mayor Guo Jinlong, the Beijing Daily newspaper reported today. Guo told Cook that he hoped Apple would “further deepen cooperation, to achieve better development,” according to the report. Cook responded that Apple will work with Beijing to strengthen cooperation and expand the market, the Beijing Daily reported, without giving details.

Officials in the mayor’s press office said they couldn’t immediately comment on the report when contacted today.

Besides adding retail stores, other areas for investment may include increasing Apple’s “very thin” staff in China, Wolf said. Cook may also consider whether to own manufacturing or research facilities in the country, he said. Foxconn Technology Group, the world’s biggest contract manufacturer of electronics, makes the iPhone in China for Apple.

Apple almost doubled its potential customer base for the iPhone this month when it signed a second carrier, China Telecom Corp., in the world’s largest mobile-phone market.

China Unicom

China Telecom had 41.2 million subscribers on its third-generation network who could use the iPhone to surf the Internet for games and videos as of the end of February. China Unicom (Hong Kong) Ltd., the nation’s first carrier to offer the iPhone, had 45.9 million 3G users.

China Mobile Ltd., the world’s largest carrier by customers, doesn’t offer the iPhone with a service contract, and its homegrown 3G network is incompatible with the device. Still, China Mobile had 15 million iPhone users on its 2G and Wi-Fi networks, the company said this month.

“Apple wasn’t willing to negotiate with China Mobile, the largest telecom operator in China, and really do what it needed to localize to the market,” Shaun Rein, managing director of China Market Research Group in Shanghai, said in a Bloomberg Television interview today. “If they had really come up with a China-first strategy, it would have done much better, far earlier.”

Most Valuable Company

Rein said his consumer research in China indicates the nation could support 100 Apple stores. If Apple is able to “get China right,” it would help propel the shares to $1,000, Rein said.

Apple, the world’s most valuable company, gained 1.8 percent to close at $606.98 in Nasdaq Stock Market trading yesterday.

The Cupertino, California-based company is also waging a court battle for rights to the trademark for its iPad tablet computer in China with failed Hong Kong-listed display maker Proview International Holdings Ltd. Apple has appealed a November court ruling that its 2009 contract to buy the iPad name in China from Proview’s Taiwan unit was invalid because the mark was owned by Proview’s Shenzhen unit.

Proview founder Rowell Yang and Roger Xie, lawyer for the Shenzhen unit, both said they were unaware of any plans for Cook to meet with Proview representatives while he’s in China.

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