Apple’s China Problem

Ben Thompson of Stratechery writing on Apple's revenue in China

The fundamental issue is this: unlike the rest of the world, in China the most important layer of the smartphone stack is not the phone’s operating system. Rather, it is WeChat. Connie Chan of Andreessen Horowitz tried to explain in 2015 just how integrated WeChat is into the daily lives of nearly 900 million Chinese, and said integration has only grown since then: every aspect of a typical Chinese person’s life, not just online but also is conducted through a single app (and, to the extent other apps are used, they are often games promoted through WeChat).

There is nothing in any other country that is comparable: not LINE, not WhatsApp, not Facebook. All of those are about communication or wasting time: WeChat is that, but it is also for reading news, for hailing taxis, for paying for lunch (try and pay with cash for lunch, and you’ll look like a luddite), for accessing government resources, for business. For all intents and purposes WeChat is your phone, and to a far greater extent in China than anywhere else, your phone is everything.

WeChat is an entrenched moat against both Apple's and Facebook's expansion in China.

Also, if you have a few minutes, take the time to read Connie Chan's piece on WeChat. The article is two years old and it still reads as a glimpse into the future of Facebook Messenger and Twitter (especially with Twitter's changes to their API to encourage bots). 

Disclaimer: At the time of this writing I own Apple and Facebook stock.

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