iPhone Sales Drop by 19% in China as Huawei & Vivo Lead the Charts

• iPhone sales in China declined by a whopping 19.1% in the first quarter of 2024 - even its global shipments are down.
• The comeback of Huawei phones is believed to be one of the main reasons.
• State agencies and government departments asking employees not to use iPhones is another important factor.

Apple's performance in China in the first quarter of this year is the company's worst since the 2020 Covid dip.

In Q1 2024:

• iPhone's China sales dropped by 19.1%.
• Apple's market share in China was just 15.7%. At the same time last year, it was 19.7%.
• As a result, Apple has lost its crown as the biggest smartphone maker in China to Vivo. It's now in third position.

Apple is clearly in dire straits in China, so much so that Apple CEO Tim Cook lied to shareholders about the iPhone's falling demand in China. Then a lawsuit was filed against him which cost Apple $490 million in settlements.

All of this has massively negatively affected Apple's share prices. So far this year, the stock has already fallen by around 14%.

Why is Apple Losing Market Share in China?

As Ivan Lam, Senior Research Analyst for Counterpoint Research, rightly pointed out, Apple's sales were subdued during the quarter as Huawei's comeback has directly impacted Apple in the premium segment.'

• In just the first quarter this year, Huawei witnessed a 70% year-on-year growth in phone sales in China.
• Its market share in the country has increased to 15.5%, up from last year's 9.3%.
• As a result of this sudden growth, the company is now the 4th largest smartphone maker in China.

Huawei's growth was largely driven by the launch of the Huawei Mate 60 smartphone. It's a next-gen smartphone equipped with a high-end chip that works perfectly with 5G connections. The reason it blew the competition out of the water is because it was the first smartphone to contain an advanced China-made AI chip.

The significance? Well, this came after the US passed sanctions banning China from accessing crucial equipment needed to stay competitive in the chip industry. Next came the Huawei Pura 70, another premium-level smartphone series.

• As per estimates from Canadian research firm TechInsights, the overall shipment of smartphones in China will cross 50 million units this year.
• Out of this,10 million units are expected to be Pura 70. If that happens, Huawei will become the #1 smartphone seller with a 19% market share in China.

Another massive reason behind Apple losing its market in China is the country's decision to decrease reliance on foreign tech.

Chine in September 2023 banned the use of iPhones in government-backed agencies, causing Apple to lose over $200 billion. It was most likely a retaliation to the above-mentioned sanctions as well as the US ban of TikTok.

Also: Apple removes WhatsApp and Meta Threads from App Store in China on Beijing orders.

Apple's Deteriorating Global PerformanceApple is not only losing its market in China but also globally. In a report released earlier this month, it was revealed that iPhone's global shipments dropped by 10% in the first quarter of 2024-because of its poor run in China plus the growing competition from Android smartphones.

In fact, just over a week ago Samsung officially surpassed Apple as the world's largest phone manufacturer, and it now has over 20.8% market share. On the other hand, Apple's is 17.3%. Apple is also in the middle of a massive DOJ lawsuit for trying to monopolize the smartphone market.

What's even worse for Apple is that while the company is losing market share, the overall smartphone market is growing-both globally and in China.

In the first quarter of 2024, the global smartphone market grew by 7.8% whereas the Chinese market grew by 1.5%. This means that there's still a growing need for smartphones, only people are not choosing iPhones anymore.

What Can Apple Do Now?

Apple has thrown several punches to try and get back to donning the Chinese smartphone market. For example, throughout the first quarter, it was offering heavy discounts on iPhones in China-as much as 1,300 Yuan ($180). However, this didn't help.

Next, just a month ago Tim Cook opened the world's second-largest Apple store in China's financial hub Shanghai in a bid to crank up sales.

There's still hope, though. Experts believe that Apple can still make a comeback by offering aggressive discounts, newer color options, and adding more AI features in Apple devices. Smartphones are getting more powerful and competitively priced by the day, meaning 60 Hertz screens for a $1,000 phone just doesn't make sense anymore.

However, how effective adding AI features will be remains a question. This is because Chinese smartphones are also heavily investing in AI. For example, Oppo has doubled down on its AI efforts and is actively investing in developing its own large language model AndesGPT.

Given the cutthroat competition in the smartphone market, we can expect to see powerful AI features in mid-range Chinese phones as well. Since Apple is pricier than your average Android smartphone, it will probably lose the AI race as well.

Know all about Google's AI push in my thorough coverage of the Google Cloud Next 2024 summit where Google unveiled a myriad of brand-new AI-backed features.

Read more: What is Darwin AI, Apple's latest AI acquisition?

The Bottom Line

I feel that if Apple were to change just one thing, it would certainly have to be an increase in the iPhones' value for money.

People have started looking beyond the benefits of a sleek ecosystem (which even Samsung promises to offer, by the way) and the social prestige attached to iPhones.

After all, if everyone has an iPhone, why not get a Google Pixel or the Samsung Galaxy S24 Ultra or even the One Plus 12 to stand out?

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