Two top tech executives are currently visiting Asia, but though the reasons for Apple CEO Tim Cook’s China sojourn are obvious, Eric Schmidt’s trip to North Korea is confusing observers of the authoritarian regime and Google alike.
Apple CEO Tim Cook met with Miao Wei, minister of China’s Ministry of Industry and Information Technology, yesterday. According to the MIIT’s Web site, the two discussed the Chinese and global tech and telecommunication industry and Apple’s business in China. The MIIT is the regulatory body responsible for the lags in rolling out the iPhone to Chinese consumers, even though China is Apple’s fastest growing marketplace. The three month delay before the iPhone 5 arrived in the Chinese market helped chip away at Apple’s marketshare in that country, according to research by Gartner.
China currently accounts for about 15% of Apple’s annual revenue, making it the company’s second largest market after the US. According to reports earlier today, Apple is reportedly working on a low-cost version of the iPhone for emerging markets, which could launch this year. A cheaper device would help move more iPhones in China, where consumers put off by the high price of the device turn toward less expensive phones. Companies which have profited from making more affordable handsets include Samsung and Nokia, as well as domestic manufacturers Huawei, ZTE and Lenovo.
A cheaper iPhone might be part of the “greater investment” in China, which Cook promised during his last visit to the country in March as part of Apple’s efforts to capture a larger slice of China’s market. China is now the world’s largest market for mobile phones, with 39 million shipments, 80% of which were Android and 12% of which were iPhones, compared to the US, where total shipments were about 58% of smartphones are Android and 36% are iPhones. Since Cook’s March visit, Apple stores in China and Hong Kong have increased from 6 to 11. The new stores include the company’s largest store in Asia, located in Beijing.
Though Apple’s iPhone 5 launch last month was its best ever in China, with 2 million phones sold in just three days, Apple’s share of China’s smartphone market is gradually eroding; in December, IDC reported that Apple’s ranking in China’s smartphone market had slipped two places to sixth place during the second quarter of 2012, while Samsung took the top spot.
Cook may also seek the Chinese government’s help in striking a deal with China Mobile. Apple has been stuck in talks with the country’s largest carrier for four years, due in part to lack of government support, according to Deutsche Bank analysts. In China, Apple sells the iPhones through its retail stores, resellers and China Unicom and China Telecom, but together they have less than half the mobile subscribers of China Mobile. Though a major hurdle is the lack of compatibility between China Mobile’s proprietary networks and iPhone’s mobile radios, the two companies have also clashed over revenue sharing models. According to Morgan Stanley reports, China Mobile may begin carrying the iPhone 5 by the second half of 2013.
On previous trips, Cook also visited the Foxconn plants where Apple devices are made. In 2010, he made an earlier visit after several workers committed suicide at Foxconn factories, and “it would not be out of the question for him to visit the sites to see how conditions are changing for plant employees,” says TUAW.
Google executive chairman Eric Schmidt and Jared Cohen, the director of Google Ideas and a former Department of State official, are visiting North Korea as part of a delegation led by former New Mexico governor Bill Richardson, who is there as part of a “humanitarian private visit” to speak with North Korean officials about the release of Kenneth Bae, an American detained in North Korean last year.
In North Korean, Schmidt’s itinerary has included a photo op in an “e-library” where students told Schmidt they were searching for information on Google, though the AP noted that university students in North Korea are “under strict instructions to access only educational materials” when they use the Internet.
There is no clear reason why Schmidt and Cohen are in North Korea right now. As UC San Diego professor and North Korea observer Stephen Haggard told Businessweek, ”Everyone in the North Korea watchers community is scratching their heads about this,” especially since Cohen last year hosted North Korean defectors at a conference in LA where they “gave harrowing accounts of privation and coerced criminal activity including drug sales.”
On the other hand, Businessweek also notes that in 2011, a North Korean delegation co-sponsored by the Asia foundation visited the Googleplex as one of several US stops, including Citigroup and Bloomberg. Some observers hope these signs mean that the North Korean government is considering opening up more Internet access in the country, though others say that idea is hopelessly naive. Either way, if Google does strike a deal with North Korea, it would likely be similar to the one it has with China, where it agrees to censorship in return for access.
Photo of Tim Cook and Miao Wei from the MIIT Web site