Why the iPhone Is Losing Out to Chinese Devices in Asia

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NEW DELHI—The iPhone X has set a new benchmark for smartphone prices and bolstered Apple Inc.’s AAPL +0.69%

Buyers from India to Indonesia are opting for models from Chinese smartphone makers like Xiaomi Corp.—sometimes called “the Apple of China”—along withBBK Electronics Corp.’s Oppo and Vivo.

China’s manufacturers are increasingly churning out higher-priced devices that compete directly with Apple’s smartphones. They often have high-end features, but carry lower price tags than the iPhone X or even older iPhone models. They are targeting potential Apple customers by offering phones with robust hardware such as metal bodies, beefy batteries and unique features iPhones lack, including special cameras for taking better selfies.

“People don’t have to stretch their budget to buy a top-end” smartphone anymore, said Kiranjeet Kaur, an analyst with research firm IDC in Singapore. Chinese vendors “now boast features which compete with the top-end in the market.”

The iPhone X or Apple’s older, more affordable models aren’t aimed at the mass market in emerging Asia, where telecom companies don’t subsidize devices as in the U.S., meaning most people pay full price for their phones up front. The typical smartphone in India and Indonesia sells for under $200, which is less than even the least expensive iPhone model and much less than the iPhone X, which costs $1,000, according to IDC.

Apple’s high-price phones helped its revenues grow 11% last quarter in the Asia-Pacific region, even though its market share has been stagnant or declining in most Asian markets.

Abhay Shahi, a 28-year-old graphic designer in the Indian city of Ludhiana, has given up on Apple for good, recently ditching his iPhone 6 for a new Xiaomi Redmi Note 4. It has most of the bells and whistles for about a fifth the price of the iPhone X. It costs about $100 less than Apple’s most affordable model, the SE, which was released in 2016.

“It has a fingerprint sensor, the camera is pretty good, and there’s no lag” in Xiaomi’s software, which is more customizable than that of the “overpriced” iPhone’s, Mr. Shahi said. “The build quality feels like a premium phone.”

An Apple spokeswoman declined to comment on its strategy for emerging Asian markets or whether it sees Chinese smartphone makers as rivals to the iPhone.

In China, Apple’s market share is roughly 8% now from 13% in 2015, research firm Canalys says. In India—which last year overtook the U.S. to become the world’s second-biggest smartphone market—Apple has had just a 2% market share since 2013. Apple’s shipments to India fell last quarter compared with the year before, a rare contraction, Canalys says.

The iPhone maker’s market share in Indonesia, home to some 260 million people, has fallen to 1% from 3% in 2013. Apple’s market share has also dropped in the Philippines and Thailand, and has remained static in Malaysia and Vietnam.

Meanwhile, Apple’s Chinese rivals are gobbling up customers. Beijing-based Xiaomi has jumped to 19% of India’s market today from just 3% in 2015. While much of that rise has been on the back of inexpensive phones, increasingly it is putting more expensive devices on the market that offer the look, feel and functionality of iPhones and even a few extra features.

Chitra Patricia, a 27-year-old Jakartan, picked an Oppo over Apple for its selfie features.

Oppo’s “selfie expert” F3 offers options such as a front-facing camera for selfies with wide angle that lends itself to “wefies,” or group shots with several people crammed into the frame. The phone also has a “beautify” function that smooths out users’ selfies, making them appear younger and more glamorous.

“It can capture around a dozen people in one ‘wefie,’” making it great for gatherings, said Ms. Patricia.

Xiaomi has an edge in many markets because it can customize for each country while Apple creates the same products for everyone, said Jai Mani, Xiaomi’s product manager for India.

Apple has worked to foster the development of mobile apps and mapping services in the country, and iPhones support several local Indian languages.

Xiaomi created special chargers for its smartphones that can handle India’s fluctuations in power supply, for example. And in a country where consumers are flooded by promotional text messages, Xiaomi tweaked its software to weed out advertisements so users don’t miss personal texts from friends.

Many Xiaomi smartphones also come with two SIM-card slots, which allow consumers to use more than one mobile network to save money, a common practice in Asia. Customers can also plug SD memory cards into some models so they can add their own music or video files.

Among the newest India-specific creations, Xiaomi announced at a launch event earlier this week in New Delhi: tweaks to its own selfie-beautification software so it doesn’t erase bindi forehead decorations or nose rings, mistaking them for blemishes.

The Chinese brands also are bringing a lot of local flavor to their advertising. Oppo and its sister company, Vivo, have blanketed Indonesia and India with billboards touting features they offer that aren’t found in iPhones.

Wahyu Adi Setyanto, a 36-year-old IT engineer in Jakarta, traded in his iPhone for a Xiaomi recently. It has a touch screen as big and bright as that of any iPhone, he says, and cost only $210.

“The exterior, when you hold it in your hand, it’s luxurious,” he said. “It feels like holding an iPhone.”