Apple (AAPL - Free Report) is foraying into the Chinese smart speaker market. The company recently announced that its HomePod will be available in China from early 2019 at a price of RMB 2,799 or $407. Further, these speakers will be available in Hong Kong at HKD 2,799 or $358.
Apple is experiencing low sales of its smart speaker owing to its late entry into the market, currently dominated by the likes of Amazon (AMZN - Free Report) and Alphabet’s (GOOGL - Free Report) Google. However, we believe the company’s strong focus toward expansion in the international markets will aid it in gaining traction. This move is in sync with the company’s expansion drive.
HomePod which was launched in the United States, Australia and the U.K. earlier this year is also now available in Canada, France and Germany (launched in June). It was recently launched in Spain and Mexico markets.
The international expansion is expected to help Apple in strengthening its footprint in the smart speaker market, which as per a report from MarketsandMarkets, is expected to see CAGR of 34.4% between 2018 and 2023 and reach $11.8 billion by the end of the timeframe.
China Holds Promise
China’s smart speaker market is rapidly growing. Per Canalys it is the world’s second largest smart speaker market. China witnessed 5.8 million shipments of smart speaker in third-quarter 2018 which accounted for 29.4% of the total worldwide shipment.
Consequently, the latest move of Apple poises it well to capitalize on this potential.
Moreover, the company’s virtual assistant Siri supports the regional languages of China namely Cantonese and Mandarin, which is a tailwind. This is likely to aid HomePod’s gain momentum among the Chinese population.
The ever-changing landscape of this data-driven world has created a niche for smart home products especially smart speakers. Further, the emergence of virtual assistants integrated with artificial intelligence (AI) is fueling the demand for these smart speakers.
The above-mentioned facts are intensifying the competition in this market. HomePod’s foray into China is likely to strengthen Apple’s competitive position against the dominant players like Amazon’s Echo and Google Home devices in the global smart speaker space.
The Canalys report shows that Amazon and Google accounted for 31.9% and 29.8% of the worldwide shipments in the last reported quarter. However, both the companies have no exposure to Chinese smart speaker market.
Apple also scores better with its regional language support in China, which the other two behemoths lack.
However, dominance of Xiaomi’s Mi AI Speaker, Alibaba’s (BABA - Free Report) Tmall Genie and Baidu smart speakers in China are likely to keep Apple under pressure. In fact, the strong performance of these speakers lit up the Chinese smart speaker market in the third quarter.
Nevertheless, Apple’s brand loyalty and loyal customer base gives it an edge over its competitors. Further, superior music quality in HomePod is a key differentiator compared with other home speakers available in the market.
Additionally, the company is working on integrating the next generation of HomePod with Face ID technology. This will enable the speaker to scan the person nearby and automatically set up music, thermostat and more, per user preference.
All these are expected to benefit Apple’s position in China.
Currently, Apple carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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