For years, Apple dominated the high-end smartphone market in China. No other company has produced a tool that may compete with the iPhone’s performance or its status as a standing object in the eyes of affluent, cosmopolitan customers.
However, there’s growing evidence that for many individuals in China, the iPhone isn’t any longer as attractive because it once was. During the first six weeks of the 12 months, historically the peak season for Chinese customers to purchase a brand new phone, iPhone sales dropped 24 percent than a 12 months earlier – says Counterpoint Research, which analyzes the smartphone market.
Meanwhile, sales of certainly one of Apple’s longtime Chinese rivals, Huawei, rose 64 percent.
These are difficult times for Apple. Analysts say the company’s newest product, a $3,500 virtual reality headset released in February, still has years to achieve popularity. Apple suffered two regulatory blows this month: an almost $2 billion fantastic from the European Union for anticompetitive music streaming practices and a U.S. government lawsuit accusing Apple of violating antitrust laws.
For a decade, China was the most significant iPhone market after the United States, accounting for about 20 percent of Apple’s sales. Now the company’s influence in China may very well be undermined by a lot of aspects: a slowdown in consumer spending, growing pressure from Beijing for people to avoid devices from American firms and the resurgence of domestic leader Huawei.
“The golden age for Apple in China is over,” said Linda Sui, senior director at TechInsights, a market research firm. According to Ms. Sui, certainly one of the most significant reasons is the growing tension between the United States and China over trade and technology. Without a big easing of geopolitical tensions, Apple could have difficulty maintaining its position.
“It’s not just about consumers,” Ms. Sui said. “It’s about the bigger picture, two superpowers competing against each other – that’s the fundamental thing behind the whole change.”
Few U.S. firms have more to lose from heightened tensions than Apple, whose newest phone, the iPhone 15, went on sale in September. It is the first line of iPhones with a titanium frame and an motion button that may be programmed to take photos or activate the flashlight.
“Five years ago, Apple had a really strong brand in China – people would bring tents and wait all night outside the Apple Store for their next product launch,” said Lucas Zhong, a Shanghai-based analyst at Canalys, a market research firm. “The iPhone 15 launch was not that popular.”
Six months later, Apple plastered billboards in cities like Shanghai, reminding residents that they’ll still buy an iPhone 15 nearby. Similar promotions helped the iPhone turn into 4 of the six best-selling smartphones in China in the final three months of last 12 months, the company said during a call with Wall Street analysts. But the flashy ad didn’t persuade 22-year-old Jason Li to go to the Apple Store on Nanjing East Road, in the heart of Shanghai’s shopping district, when he needed to interchange his iPhone 13 Pro Max.
Instead, Mr. Li went to the Huawei flagship store directly across the street, where he considered the Mate 60 Pro.
“I don’t want to use iOS anymore,” he said, referring to the iPhone operating system. “It’s kind of dated.”
Apple declined to comment.
For some people in China, buying a phone has turn into a political statement. Debates have erupted online over whether using an iPhone is disrespectful to Chinese tech firms or handing over personal data to the US government. Last 12 months, employees at some Chinese government agencies reported they were banned from using iPhones at work.
These directives got here to light lower than two weeks after Huawei unveiled the Mate 60 Pro, a smartphone equipped with the company’s own operating system and a pc chip more advanced than ever produced in China.
Huawei released the device in the final days of Gina M. Raimondo, US Secretary of Commerce’s trip to China. Chinese commentators and state media heralded it as a triumph for Huawei in the face of Washington’s attempts to limit the company from developing such technology.
Mate 60 Pro immediately became a sensation. Huawei’s sales surge translated into the first six weeks of this 12 months, with the company gaining the second-largest share of the smartphone market, as much as 17 percent from 9 percent a 12 months earlier, based on Counterpoint data.
“Today, when people hold Mate 60, they feel the same way they did years ago when someone saw them on the street holding an iPhone,” said Ivan Lam, senior analyst at Counterpoint Research in Hong Kong. This is very true for people over 35, the age group that buys the most smartphones, he added.
The Chinese smartphone market is split into many firms. The domestic brands Vivo, Oppo and Xiaomi are competing with Apple and Huawei for the largest pieces.
Apple began selling iPhones in China in 2009. The last time it lost ground to Huawei was in 2019 when the Trump administration inadvertently prolonged Apple’s bailout, restricting U.S. tech firms from doing business with Huawei. Google, the maker of the Android operating system, and a number of other semiconductor firms have cut off support for the Chinese smartphone maker.
When Huawei struggled, Apple bounced back. According to Counterpoint, the share of phones sold in China increased to 22% in 2022 from 9% in 2019. In the fiscal 12 months ending September 2022, Apple reported record revenue of $74 billion from the region.
But the restrictions also forced Huawei to develop its own wireless chip and operating system, leading to the technology underlying the Mate 60 Pro. The operating system attracts Chinese customers, and lots of of China’s biggest tech firms have created apps exclusively for it, further alienating users from platforms used outside China.
Huawei’s innovation has made Apple’s latest models seem tacky by comparison. And as China’s economy has struggled to rebound from the Covid pandemic, many consumers are hesitant to spend money on what appears to be an incremental modernization. Owners of about 125 million of the 215 million iPhones in China haven’t upgraded to the newer devices over the past three years, based on Daniel Ives, an Apple analyst at Wedbush Securities.
Apple responded to challenges in China. Its chief executive, Tim Cook, traveled to the country and visited Apple suppliers. Last week he was present at the grand opening Apple store near Shanghai’s Jing’an Temple – the company’s eighth store in Shanghai and 57th in China – to a crowd of Apple fans. The company also claimed so is expanding its research and development laboratories in Shanghai.
But for some buyers, Apple’s efforts have been overshadowed by Washington’s approach to the company’s Chinese rival.
While waiting at the Genius Bar for help with an ailing iPhone 12 at the Apple Store on Nanjing East Road in Shanghai, 38-year-old Chi Miaomiao said he recently bought Huawei’s Mate 60 Pro as his second phone. Huawei became fascinated with it after CFO Meng Wanzhou was arrested by Canadian authorities in 2018 at the request of the United States, which accused her of misleading banks about Huawei’s activities in Iran. Ms. Meng’s detention sparked an outpouring of support in China, where many viewed her as a hostage.
“Huawei is our own brand, and I think because of this political incident, we Chinese should be united,” Chi said.
Upstairs in the Apple sales floor, 23-year-old Li Bin and two friends were debating about the latest iPhone models. Quality-wise, Huawei and Apple were almost comparable, Li said, and while he thought the iPhone was barely higher, it was also costlier.
“Maybe I will switch to iPhone,” Li said, “when I become richer in the future.”
Li You AND Zixu Wang contributed to research.
