The Apple Inc. iPhone Is Losing Ground in One Key Market

By Markets Fool.com

Demand for Apple's iPhone 6 has been unprecedented. Collectively, the iPhone 6 and iPhone 6 Plus have smashed existing sales records, and when Apple reports earnings this season, investors may find that the Cupertino tech giant sold more than 70 million iPhones during the quarter.

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The company has seen great demand across the board -- in North America and Europe, Apple market share increased last quarter, according to recent data from research firm Kantar Worldpanel.

Yet, there was one market where the latest iPhones received a surprisingly cool reception -- Japan, where sales suffered a surprising double-digit decline.

Kantar's data
According to Kantar, the iPhone accounted for 48% of smartphones sold in Japan during the third quarter, which ran from the beginning of August through the end of October. The Android operating system powered a similar 48.1%.

That's quite impressive, given that on a global basis, Android's market share is approaching 85%. In fact, Japan remains Apple's single strongest market, with more Japanese buyers (on a percentage basis) choosing the iPhone than Americans (in the same quarter, the iPhone accounted for 41.5% of the smartphones sold in the U.S.).

However, that figure is down significantly from last year. During the same period in 2013, nearly two-thirds (61.1%) of Japanese smartphone buyers chose an iPhone, compared to only 36.2% opting for an Android-powered device. With Windows Phone accounting for less than 1% of the Japanese smartphone market, Android OEMs appear to be taking share directly from Apple.

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This stands in stark contrast to other markets, where the release of the iPhone 6 boosted market share significantly -- Apple saw a 3.1% bump in Germany and 10.4% in Great Britain. In fact, of the major markets Kantar tracks, Japan was the only one where market share fell.

A difficult comp and tougher competition
The decline in Japan might be partially explained by the year-over-year comparison itself -- in September 2013, NTT Docomo, one of the country's largest telecoms, began selling the iPhone for the very first time. The arrival of the iPhone 5s and iPhone 5c on the NTT Docomo network may have sparked an over-sized wave of iPhone purchases (as long waiting subscribers rushed to buy units), significantly inflating 2013 sales and thus making an annual comparison difficult.

But Apple also faces intensifying competition from a number of home-grown competitors. The SonyXperia line, despite falling short of company expectations on a global basis, has done relatively well in Japan. Other Japanese consumer electronic firms -- including Sharp and Fujitsu -- compete in their home country but have little presence elsewhere.

Another possibility is that Japanese consumers have less interest in large smartphones: the bigger screens offered by the iPhone 6 and iPhone 6 Plus may not be appealing. Notably, Samsung -- whose high-end phones have long been known for their larger size -- holds a relatively paltry 6% share of the Japanese smartphone market. Sony, on the other hand, has targeted Japan with mini versions of its flagship handsets.

Japan remains a key market
As one of the largest smartphone markets in the worldand a longtime fan of Apple products, the drop in Japan is a development worth watching.With such a wealthy country and a history of generous carrier subsidies, Japan should be a perfect fit for the iPhone.

To be clear, the 48% market share is still impressive, but a double-digit drop when every other region is showing growth is bound to raise some eyebrows. Future data may show it to be a temporary aberration, but if it turns into a long-term trend, that may serve as a clear signal that Japanese preferences are changing.

The article The Apple Inc. iPhone Is Losing Ground in One Key Market originally appeared on Fool.com.

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.