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How Apple iOS Is Losing Ground to YunOS in China

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YunOS set to dethrone iOS in China

Alibaba, Apple’s (AAPL) new tormentor in China (FXI), is aggressively pushing its alternative mobile operating system, YunOS, in its domestic market. According to a South China Morning Post report, YunOS is set to finish the year as the second-largest mobile operating system in China, overtaking Apple’s iOS.

YunOS is expected to run more than 100 million smartphones in mainland China this year, giving it a 14% share of mainland China’s smartphone operating system (or OS) market. However, the surging YunOS could complicate Apple’s business in China, which is a key market for the iPhone—Apple’s most important product.

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Stiff competition

Apple is already struggling with a wave of competition from homegrown Chinese manufacturers of smartphones powered by Android (GOOGL). Chinese smartphone brands Huawei, Oppo, and BBK have burst into the premium handset segment and are giving Apple and Samsung (SSNLF) a run for their money.

A Gartner report showed Huawei, Oppo, and BBK gained market share in China in 3Q16. These three brands took advantage of Samsung’s Galaxy Note 7 recall over the risk of explosion. However, Apple only managed to defend its share despite the Galaxy Note 7 crisis. Apple had the opportunity to sell more iPhones and grab a larger share in China’s premium smartphone segment.

Taking on the incumbents

Alibaba’s (BABA) goal is to make YunOS the top mobile operating system in China. However, while it could finish atop iOS in 2016, Android presents a major hurdle. Android powers most smartphones in China and the world, and it still draws more interest than the other operating systems.

For example, Nokia (NOK) is expected to tap into the Android ecosystem as it returns to the smartphone business. Analysts say it could be difficult for YunOS to find success outside its domestic market. In addition to smartphones, YunOS also powers tablets, set-top boxes, smart cars, and robots.

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