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September 25, 2017

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Apple suffers from slow expansion into China

SHANGHAI -- Apple Inc. has more retail stores in Pennsylvania than in all of China — where it earns a fifth of its revenue — and a slow pace of expansion may cost the firm more than just sales.

Apple's six stores in Greater China are routinely packed, and customers often wait in long lines for iPhone repairs. Scalpers are known to camp out to be first in line for new products, which they then re-sell for a tidy profit.

The California company is notoriously fastidious when it comes to its flagship stores, and has said it is taking its time in China to ensure it secures the right locations. But its retail expansion has fallen well short of its own goals.

In 2010, Ron Johnson, then-Apple's retail head, forecast the company would have 25 stores in China by this year.

"There's certainly more demand than Apple can serve with their store footprint currently," said Torsten Stocker, a partner at business strategist Monitor Group.

The clamor for Apple products has spawned a bustling grey market where smuggled goods are peddled by unauthorized resellers. Copycat Apple stores have popped up in smaller cities that don't have the real thing.

The Apple frenzy will only intensify now that the company has agreed to pay Proview Technology (Shenzhen) US$60 million to settle a lawsuit over the iPad trademark, freeing it up to sell its latest tablet computer.

Apple has two retail stores in Beijing, three in Shanghai and one in Hong Kong. Chinese government officials said last month the company is looking to open two more in the major cities of Chengdu and Shenzhen.

In Pennsylvania, a state with a population of 12.7 million, Apple has eight stores, including three in the city of Pittsburgh alone. The population of China is 1.3 billion.

Apple declined to comment for this story.

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