Apple dominated the high-end smartphone market in China for years. No other company made a device that could match the iPhone’s performance—or its position as a status object in the eyes of wealthy, cosmopolitan buyers.
But evidence is mounting that the iPhone no longer has the same appeal for many people in China as it once did. According to Counterpoint Research, a firm that analyzes the smartphone market, iPhone sales fell 24 year-over-year in the first six weeks of the year, historically the peak season for Chinese buyers to splurge on a new phone percent back.
Meanwhile, sales at Huawei, one of Apple’s long-standing Chinese competitors, rose 64 percent.
It’s a challenging time for Apple. Analysts say its latest product, a $3,500 virtual reality headset released in February, is still years away from gaining mainstream traction. This month, Apple suffered two regulatory setbacks: a nearly $2 billion fine from the European Union for anti-competitive music streaming practices and a lawsuit from the U.S. government alleging Apple violated antitrust laws.
For a decade, China has been the most important iPhone market after the USA and accounts for around 20 percent of Apple sales. Now the company’s hold on China could be weakened by a number of factors: a slowdown in consumer spending, growing pressure from Beijing for people to avoid devices made by U.S. companies and the resurgence of national leader Huawei.
“Apple’s golden age in China is over,” said Linda Sui, senior director at TechInsights, a market research firm. One of the main reasons is increasing tensions between the United States and China over trade and technology, Ms. Sui said. Without a significant easing of geopolitical stress, it will be difficult for Apple to maintain its position.
“It’s not just about consumers,” Ms. Sui said. “It’s about the bigger picture, the two superpowers competing with each other – that’s a fundamental thing behind the whole change.”
Few American companies have more to lose from these heightened tensions than Apple, whose newest phone, the iPhone 15, went on sale in September. It is the first iPhone series with a titanium frame and an action button that can be programmed to take photos or turn on the flashlight.
“Five years ago, Apple had really strong branding in China – people brought tents to wait all night outside the Apple Store for the next product launch,” said Lucas Zhong, a Shanghai-based analyst at Canalys, a market research firm. “The iPhone 15 launch wasn’t nearly as popular.”
Six months later, Apple has put up billboards in cities like Shanghai to remind residents that they can still buy an iPhone 15 nearby. Similar promotions helped the iPhone occupy four of the top six best-selling smartphones in China in the final three months of last year, the company said during a call with Wall Street analysts. But the eye-catching advertisement didn’t convince 22-year-old Jason Li to visit the Apple Store on Nanjing East Road in the heart of Shanghai’s shopping district when he needed to replace his iPhone 13 Pro Max.
Instead, Mr. Li went to the Huawei flagship store directly opposite, where he pondered the Mate 60 Pro.
“I don’t want to use iOS anymore,” he said, referring to the iPhone’s operating system. “It’s a little old fashioned.”
Apple declined to comment.
For some in China, buying a phone has become a political statement. Debates have erupted online over whether using an iPhone is disrespectful to Chinese tech companies or amounts to sharing personal information with the U.S. government. Last year, employees at some Chinese government agencies reported being told not to use iPhones for work.
These instructions came to light less than two weeks after Huawei unveiled the Mate 60 Pro, a smartphone equipped with the company’s own operating system and a computer chip more advanced than those previously made in China.
Huawei released the device in the final days of a trip to China by Gina M. Raimondo, the U.S. Secretary of Commerce. Chinese commentators and state media proclaimed a triumph for Huawei in the face of Washington’s attempts to prevent the company from developing such technology.
The Mate 60 Pro was an instant sensation. The surge in Huawei sales continued in the first six weeks of this year, as the company captured the second-largest share of the smartphone market, up to 17 percent from 9 percent last year, according to data from Counterpoint.
“When you hold the Mate 60 series today, people have a feeling like many years ago when someone saw them on the street with an iPhone in their hand,” said Ivan Lam, senior analyst at Counterpoint Research in Hong Kong. This is particularly true for people over 35, the age group that buys the most smartphones, he said.
China’s smartphone market is divided into a number of companies. The domestic brands Vivo, Oppo and Xiaomi compete with Apple and Huawei for the largest pieces.
Apple began selling iPhones in China in 2009. The last time the company lost ground to Huawei was in 2019, the Trump administration inadvertently extended a lifeline to Apple by banning U.S. tech companies from trading with Huawei. Google, maker of the Android operating system, and several semiconductor companies have stopped supporting the Chinese smartphone maker.
While Huawei struggled, Apple recovered. According to Counterpoint, its share of phones sold in China rose to 22 percent in 2022 from 9 percent in 2019. Apple reported record revenue of $74 billion in the region in its fiscal year ending September 2022.
However, the limitations also forced Huawei to develop its own wireless chip and operating system, which led to the technology behind the Mate 60 Pro. The operating system is a draw for Chinese buyers, and many of China’s biggest tech companies have developed apps exclusively for it, further driving users away from platforms used outside China.
Huawei’s innovation makes Apple’s latest models seem cumbersome in comparison. And as China’s economy struggles to recover from the Covid pandemic, many consumers are reluctant to spend money on what feels like incremental modernization. According to Daniel Ives, an Apple analyst at Wedbush Securities, owners of about 125 million of the 215 million iPhones in China have not upgraded to newer devices in the past three years.
Apple has responded to the challenges in China. CEO Tim Cook traveled to the country and visited Apple’s suppliers. Last week, he attended the spectacular opening of an Apple Store near Jing’an Temple in Shanghai – the company’s eighth store in Shanghai and 57th in China – in front of a crowd of Apple fans. The company also announced that it would expand its research and development laboratories in Shanghai.
But for some buyers, Apple’s efforts have been overshadowed by Washington’s crackdown on the company’s Chinese rival.
While waiting for help with his ailing iPhone 12 at the Genius Bar at the Apple Store on Nanjing East Road in Shanghai, Chi Miaomiao, 38, said he recently bought Huawei’s Mate 60 Pro as his second phone. He was drawn to Huawei after its chief financial officer Meng Wanzhou was arrested by Canadian authorities in 2018 at the request of the United States, who accused her of misleading banks about Huawei’s business in Iran. Ms. Meng’s detention sparked a wave of support in China, where many viewed her as a hostage.
“Huawei is our own brand, and because of this political incident, I think we Chinese people should be united,” Mr Chi said.
Up in the Apple sales floor, Li Bin, 23, and two friends were discussing the latest iPhone models. Huawei and Apple are almost comparable in quality, Mr. Li said, and while he thinks the iPhone is slightly better, it is also more expensive.
“Maybe I’ll switch to an iPhone,” Mr. Li said, “if I get richer in the future.”
Li You contributed to the research.
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2024-03-25 04:01:17
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