Is Apple’s Tim Cook right about China? – Bridging the digital divide

Apple hasn’t had it easy in China. Back in 1998, Chinese company Proview, which has been semi-defunct for quite some time, produced a device that came to be known as Internet Personal Access Device or iPAD. Proview’s IPAD does not share any of the features of Apple’s tablet as we have come to know it but since Proview managed to hold onto the name for nearly 15 years and has successfully stopped the sale of the iPad tablet in China. Now, Apple has paid out a reported $60 million for the name.

The face of Shanghai's skyline

June 2012 and a Chinese household chemical company called Jiangsu Xuebao has sued Apple in Shanghai for allegedly infringing its “Snow Leopard” trademark, name used by Apple used in one of its more recent Mac OS X distributions (2009). According to the lawsuit, Xuebao is seeking roughly $80,000 in compensation from Apple.

A number of reports have also shown that Android devices are considerably more prevalent in the country and that this operating system is to become the country’s largest with more than double the devices of iOS.

And yet,  Apple’s CEO, Tim Cook, remains focused on China and continues to herald it as a key market for the company. In January 2010, Cook  said “I firmly believe that we are just scratching the surface right now and think there is an incredible opportunity for Apple.”

Is Tim Cook right in pursuing this proverbial basket of golden iOS?

Is iOS device ownership as extensive in China as it seems?

Recent research has shown that for the first time ever, China leads in new smart device adoption (iOS and Android smartphones and tablets), with some 109 million users already and some 122 million customers that have the means to buy one. Chinese people are acting on that ability by adopting Android and iOS devices at the fastest rate world wide for the first time ever.

However, according to figures from Shanghai-based Stenvall Skoeld and Company iOS device ownership is dominated by just a few select urban areas. As he graphic below highlights, urban areas like Guangdon, Beijing, Shanghai, Zhejiang and Jiangsu account for the majority of iOS device ownership.

This is a somewhat common phenomenon result of the greater level of affluence in most cities in China and in the rest of the world. However, breaking the data down to devices per person shows that the gulf between urban and other areas is extremely large in China. According to the figures, an average one in ten persons own an iOS device in Beijing and Shanghai, a ratio considerably higher than most other parts of the country.

The task of reaching non-urban consumers is one that Apple faces in many markets and although the firm is likely already sensitive to this digital divide, it might not be aware of just how significant it is in China.

Towards bridging the digital divide in China

A report released by the  CNNIC on Chinese rural Internet development showed that  while the Internet penetration rate in urban areas was 45% in 2009, it is only 15% in rural China. This discrepancy continues to increase mainly due to the lack of access to electricity and Internet infrastructure in rural areas, the cost of Internet relative to rural income levels and the lack of education and Internet awareness of people living in rural areas.

The same report highlighted some of the main differences between rural and urban areas:

  • Rural Internet users appeared to be comparatively younger and less-educated, with a large proportion being students. 
  • Internet business usage was much lower in rural areas.
  • Usage rages for online shopping and online payment applications for urban Internet users neared 32% and 28% respectively while 18% and 15% were recorded for rural Internet users. 
Further studies conducted by the Governance Project documented the digital divide by focusing on computer ownership, computer use and Internet access of students in different regions in China and according to ethnicity. The following graphs are results obtained during their analysis in 2009-2010:
As shown above, access to technology and quality teaching resources is limited in many rural schools in China. And while gains are definitely being made, there is no doubt that the quality of learning and the access to technology lags behind in rural areas. 
The United Nations Development Programme (UNDP) in China runs a 2.5 million dollar project for making Internet accessible to rural areas. The ‘Go West’ project in the Tenth Five-Year Plan (2001-2005) calls for the improvement of infrastructure in the more disadvantaged Western regions, laying approximately one million kilometers of new fibre-optic and installing a number of satellite telecommunications facilities between the years 2001-5. 
So, while the big Chinese metropolies are seeing a saturation of Internet development, rural areas are ready and eager and would certainly benefit from the arrival of (ethical?) technology suppliers like Apple. I certainly think this is a win-win move for both investors and rural communities in need to be connected globally.

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