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Can the iPhone 11 turn around Apple's fortunes in China?

The US phone maker has some key questions left unanswered: price, 5G and trade war

Chinese customers can start pre-ordering new iPhone 11 this Friday, Apple’s China website shows.

PALO ALTO, U.S. -- The recently released iPhone 11 came with a surprise feature: a cheaper price tag than its predecessor. It is the first time Apple has cut the starting price for the latest generation of its iconic handset, a sign that the company is "laser-focused" on regaining its lost ground in China, the world's biggest smartphone market.

But industry experts say Apple still has some key questions to answer -- particularly regarding 5G -- before it can hope to reverse its shrinking market share in China.

The U.S. tech giant unveiled the iPhone 11, which has a starting price of $699, at its headquarters in California on Monday, local time. The higher-end iPhone 11 Pro and iPhone 11 Pro Max start at $999 and $1,099, respectively

Apple once dominated China's market for premium smartphones, with iPhones accounting for over 80% of handsets sold in the $600-$800 price bracket in the first quarter of 2018. A year later, that dominance had vanished, with its market share plunging to 37% as local rivals overshadowed the iPhone.

During that same period, Chinese phone maker Huawei Technologies has seen its share of the premium smartphone market grow nearly fivefold to 48%, according to Counterpoint, an Asia-based technology analysis company.

China is still a key market for Apple, accounting for more than 17% of its total sales.

To regain smartphone market share, however, the company will have to grab the "window of an upgrade opportunity," according to Daniel Ives, managing director at Wedbush Securities, who estimates that between 60 million and 70 million smartphone users in China will replace their handsets this year.

"The base iPhone costs $699, which is $50 cheaper than we were expecting and a clear indicator Apple is laser-focused on sparking further demand in the all-important China region," Ives said.

Apple also plans to launch a lower-cost iPhone next spring to win customers in emerging markets, the Nikkei Asian Review recently reported, a sign that it is focusing more on competitive pricing.

"Apple does need to keep that premium pricing to be a premium brand, but they also have to recognize how the market is performing," said Tuong Nguyen, senior analyst at U.S.-based tech advisory company Gartner.

A perhaps more critical question for Apple in China is when it will release a 5G-compatible iPhone.

China Mobile and the other two China telecom leaders are expected to roll out 5G communication in most major cities in China by year-end. Chinese customers are eager to experience 5G as soon as the infrastructure is in place, and Asian phone makers have been racing to compete for the upcoming market by unveiling 5G-compatible smartphones.

Huawei's 5G smartphone went on sale in August, with more than 1 million customers placing preorders. Fellow Chinese maker Xiaomi is expected to unveil its new 5G phone soon, while Samsung Electronics of South Korea launched its first 5G smartphone earlier this year.

At Tuesday's event, Apple executives did not give out any hints on the 5G iPhone.

"The lack of 5G is little surprise. Whilst it stands to impact Apple in key markets such as China, Apple has opted to echo its approach with 3G and 4G by waiting for networks to be established so it can deliver 5G at scale with maximum impact," said Geoff Blaber, vice president of research at technology advisory firm CCS Insight.

"When I think of Apple, it's not always the first or best in hardware or new technology. Apple usually takes time to try on the technology and then launch when they can provide the best experience," said Gartner's Nguyen. "But it is certainly possible that Chinese customers will hold off buying an iPhone 11 until the 5G-compatible iPhone comes out," he added.

The ongoing U.S.-China trade war is also looming over Apple in China.

Neil Shah, research director at Counterpoint, said two trade war-related factors could inhibit demand for the iPhone: the economic uncertainty that it is causing, and a rise in nationalism that has consumers turning to local brands, especially Huawei.

"In this backdrop, the reception in China for the new iPhones is estimated to be underwhelming," Shah said.

Counterpoint forecasts Apple could sell approximately 30 million to 35 million iPhones this year in China, down from the 63 million units it sold in 2015 during the iPhone 6/6Plus boom.

Nikkei staff writer Alex Fang in New York contributed to this report.

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