Jan. 16 (Bloomberg) -- When it comes to smartphone screens, size matters for Xu Yinghong.
Shopping for a new handset in Beijing, the 25-year-old electrician was deciding between devices from Apple Inc. and Samsung Electronics Co. He was leaning toward the South Korean company’s Galaxy Note 3, with a 5.7-inch display, instead of the iPhone 5s that measures 4 inches.
“The screen is bigger,” Xu said at the Wanshanghui Saige Digital Mall in southern Beijing. “It’s more comfortable to look at if I’m watching videos or playing games.”
Apple is trying to boost its lagging share of the world’s biggest market by selling handsets through China Mobile Ltd.’s 763 million users starting tomorrow. The iPhone maker faces challenges because many Chinese customers prefer to have one large-screen device for checking e-mail, browsing the Web and watching videos. Every other fourth-generation smartphone offered by China Mobile is at least a half-inch (1.27 centimeters) larger than Apple’s models.
The smallest 4G handset China Mobile sells is Sony Corp.’s Xperia SP M35t at 4.6 inches, which is 15 percent larger than the iPhones. The rest are larger than 5 inches.
About 40 percent of all devices using Google Inc.’s Android operating system sold this year through Chinese carriers will have screens measuring at least 5 inches, said Bryan Wang, principal analyst and country manager in China for Forrester Research Inc. That is about double the percentage of Android devices sold globally.
“China is driving the demand for large-screen devices,” Wang said.
Suwon, South Korea-based Samsung is the biggest maker of phones using Android, offering models at various prices. Early recognition of the appeal of large-screen devices helped Samsung win the lead in China, said Duncan Clark, chairman of BDA China Ltd., which advises technology companies.
“A model with a bigger screen is key to take on Samsung,” Clark said of Apple. “Just look at the popularity of the Note and other models with much bigger screens.”
Samsung captured 21 percent of smartphone shipments in China in the third quarter, compared with Apple’s 6 percent, according to Canalys. Samsung ranked first and Apple fifth, with three domestic vendors in-between.
Pre-orders for the iPhone have reached about 1 million units, China Mobile said. Apple Chief Executive Officer Tim Cook and China Mobile Chairman Xi Guohua met in Beijing on Jan. 15, with the companies announcing a multiyear agreement.
Xue Yujiao, a 25-year-old computer consultant, bought a Meizu MX3 with a 5.1-inch screen this week because he was frustrated with his Lenovo Group Ltd. handset’s 4-inch display.
“When I first bought the small one, all I did was talk on the phone, but now my demands are much greater,” Xue said in Beijing. “Now I watch a lot of movies on my phone, and the larger display is much better for that.”
Apple may introduce two larger-screen iPhone devices this year, Cleveland Research analyst Benjamin Bollin said in a note dated Jan. 13. Carolyn Wu, a Beijing-based spokeswoman for Apple, declined to comment on whether the company has plans to release a larger device.
Apple, which counted on China for more than 15 percent of its sales last year, opened its 10th store in the country this month.
Screen size also matters in China because mobile phones often take the place of tablets, personal computers and televisions. Apple’s potential customer pool is limited by the cost of the iPhone, which is more than the equivalent of $700.
Chinese carriers don’t offer the same levels of discounts and subsidies that carriers in the U.S. do. China Mobile will offer a free iPhone only with its most expensive data plan, which is a minimum 588 yuan a month, it said Jan. 15.
“Many consumers in China use smartphones as their first and primary device for multimedia content consumption due to limited budget,” said Lydia Bi, a research analyst at Canalys. “Apple will find it hard to continue justifying the decision of not catching up with the screen size in most devices.”
The largest handsets sold by China Mobile include HTC Corp.’s 8088 and the Coolpad 8970L made by China Wireless Technologies Ltd., both featuring screens measuring 5.9 inches.
The release of the iPhone through China Mobile coincides with the weeklong Lunar New Year celebration, a period that generated $86 billion in retail sales last year, as consumers went shopping during the break using their annual bonuses. Apple cut the price of its iPhone 5s and 5c at stores in China and Hong Kong on Jan. 10 for a one-day sale ahead of the shopping holiday.
Cook is counting on the agreement with China Mobile to boost market share and help trigger growth after its first annual profit decline in at least a decade. The company generated $27 billion in sales in what it calls Greater China, which includes Hong Kong and Taiwan, up 14 percent from a year earlier.
Apple will boost its business in third- and fourth-tier cities with the China Mobile deal, Cook said Jan. 15, according to the state-run China Daily newspaper.
Samsung shipped 91 million smartphones globally in the fourth quarter, according to an estimate by Seoul-based KB Investment & Securities Co. Apple shipped 33.8 million smartphones in the quarter ended Sept. 30, the Cupertino, California-based company said.
While China Mobile’s agreement to distribute the iPhone improves Apple’s outlook in the market, the handset’s prospects are mixed, in part because of screen size, said Sandy Shen, an analyst with Gartner Inc.
Eric Chan, a 29-year-old engineer in Hong Kong, replaced his iPhone 4 last year with a Samsung handset. Chan said he uses his phone for work and wanted a device on which he could look at e-mails on a single screen without a lot of scrolling.
The iPhone’s screen was too small for prolonged reading, he said.
“The size does matter,” Chan said. “That’s why I switched to the Samsung S4, which has a bigger screen.”
--Edmond Lococo. Editors: Aaron Clark, Michael Tighe