Apple add-ons ripe market for local firms

Shenzhen manufacturers make more than $1.5 billion a year from iPhone and iPad accessories

Walking through the Huaqiangbei area of Shenzhen, it is not uncommon to see crowds of people thronging the shops selling accessories for Apple's iPhone and iPad. Known as the "first street of electronic products" in China, Huaqiangbei attracts 300,000 to 500,000 shoppers every day for products as diverse as regular iPhone cases to customized earphones and large volume portable batteries. But what makes the street really unique is that it is the destination of choice for Apple aficionados from China and abroad.

The MiLi-branded portable battery for Apple products. [Photo / China Daily]

Not surprisingly in Shenzhen, there is a whole genre of industries that thrive from producing accessories for Apple products, cashing in on the immense popularity of the US company in China. These 500-odd companies in Shenzhen realize profits of more than 10 billion yuan ($1.58 billion) every year from Apple accessory production and sales, according to statistics provided by the Shenzhen Mobile Communications Association.

"Manufacturing of Apple accessories is yet another growth engine for small and medium-sized enterprises in Shenzhen," said Sun Wenping, the executive president of the association.

According to Sun, the Apple accessory industry is on the fast track to growth as it offers high revenue prospects and steadily growing user numbers.

"The normal profit one can expect from a cell phone in Huaqiangbei is around 10 yuan to 20 yuan. But an iPhone case, with a manufacturing cost of around 20 yuan, can fetch a sales price of as much as 200 yuan in an authorized store."

Statistics from Analysys International, a Beijing-based research firm, shows that in the second half of last year, the total number of iPhone and iPad users in China grew from 2.26 million to 3.15 million, a growth rate of 40 percent.

For accessory makers the propelling factor has been the growing popularity of Apple devices in China, Sun said.

Early mover

Hali-power was one of the first companies in China authorized by Apple to produce accessories. Set up in 1984, Hali-power has been designing and producing batteries for cell phones for more than 25 years.

In 2007, when Apple launched its iPhone 3, the company realized that unlike other cell phones its batteries were embedded and power-intensive. To address this problem it realized that it needed to team up with external accessory makers to provide solutions.

Sensing an opportunity for cooperation, Hali-power entered into negotiations with the US company and in 2009 became a provider of Apple-approved components.

Though the entire process was lengthy and time-consuming, Xiao Dingbang, PR director of Hali-power, said that it has been a rewarding experience for the Shenzhen company.

After its association with Apple, Hali-power saw a jump in its fortunes with its sales tripling in 2010. Xiao, however, did not reveal any numbers or the profit margin.

More importantly, the company saw a dramatic improvement in its R&D and manufacturing capabilities after teaming up with Apple, he said. It also helped in the company's transformation from an original equipment manufacturer to a manufacturer with its own brand, Xiao said.

Every product made by the company carries a label on it, reading "Made for iPhone" or "Made for iPad". Its products span four categories - portable batteries for Apple, universal batteries for all smartphones, printers and projectors for iPhones.

Hali-power has launched its own brand of peripherals called MiLi and spends about 5 percent of its revenue on marketing and promotion. The company is considered one of the leading portable battery makers in China, and its products are stocked by most major electronics retailers such as Gome and Suning.

The Apple accessory industry in Shenzhen can broadly be classified into two categories. While one set of companies provides extra functions such as portable batteries, another section makes things like iPhone cases and protective screen sheets.