>> In China's cutthroat smartphone market, Apple's making a play to hitch sales onto services in everything from digital payment to online games. The move could be crucial money after the company posted a dip in first quarter iPhone sales. With revenue in China slipping as local rivals eat into the market.
That strategy makes sense given China drove 50% of growth in the App Store last year. But as Reuter's Kate Codell explains, the new focus comes with some local problems.>> It comes with a lot of separate risks, which aren't involved in hardware. So there's a lot of things that the Chinese government has been cracking down on in the last year, including live streaming, including media, including games.
And all of these things fit in to Apple's new services ecosystem. We can expect that the're gonna come into conflict with regulators on the content side a lot more, compared to when they're just selling straight hardware.>> As Beijing clamps down online on one side, experts expect local brands to move aggressively into services too.
To compete, Apple really needs to nail its next iPhone model this fall.>> Getting that next phone into the hands of consumers is really, really important. Not just for selling hardware and making money, but for getting a bigger install base to sell more of these services. And really bring people into their ecosystem so that they can compete with these people like WeChat.
I mean, these firms like WeChat, these large China players that are coming up and building their own ecosystems.>> In April last year, regulators forced Apple to pull its iBooks and movie from China just weeks after they went live. And the company's gaming apps have had setbacks with new rules that say foreign developers need local partners.
Thos are hurdles that local brands with cheaper phones won't always need to jump. Making it that much harder to convince Chinese buyers to remain inside Apple's universe.