For years, Apple has dominated the high-end smartphone market in China. No other company has made a device that can match the iPhone’s performance – or its position as a status object in the eyes of wealthy, cosmopolitan buyers.
But it’s increasingly clear that, for many in China, the iPhone no longer has the appeal it once did. During the first six weeks of the year, historically a peak season for Chinese shoppers looking to purchase a new phone, iPhone sales fell 24 percent compared to a year earlier, according to Counterpoint Research, which analyzes the smartphone market.
At the same time, sales of one of Apple’s long-time Chinese rivals, Huawei, increased by 64 percent.
It’s a tough time for Apple. Analysts say its latest product, a $3,500 virtual reality headset launched in February, is still far from being appreciated by the general public. This month, Apple suffered two regulatory sanctions: a nearly $2 billion fine from the European Union for anticompetitive music streaming practices and a U.S. government lawsuit claiming Apple violated laws antitrust.
For a decade, China has been the most important market for the iPhone after the United States, accounting for about 20% of Apple’s sales. Today, the company’s grip on China could be dislodged by a series of factors: a slowdown in consumer spending, growing pressure from Beijing for people to avoid devices made by American companies and the resurgence of the national champion Huawei.
“Apple’s golden period in China is over,” said Linda Sui, senior director of TechInsights, a market research firm. One of the main reasons is growing tension between the United States and China over trade and technology, Ms. Sui said. Without a significant reduction in geopolitical tensions, it will be difficult for Apple to maintain its position.
“It’s not just about consumers,” Ms. Sui said. “It’s about the big picture, the competition between the two superpowers, it’s a fundamental element behind all this change.”
Few American companies have more to lose in these heightened tensions than Apple, whose latest device, the iPhone 15, went on sale in September. This is the first iPhone line to feature a titanium frame and an action button that can be programmed to take photos or turn on the flashlight.
“Five years ago, Apple had a very strong brand image in China: people would bring 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 company. . “The iPhone 15 launch wasn’t as popular.”
Six months later, Apple put up billboards in cities like Shanghai, reminding residents that they can still buy an iPhone 15 nearby. Similar promotions helped the iPhone account for four of the six best-selling smartphones in China in the final three months of last year, the company said on a call with Wall Street analysts. But that high-profile publicity didn’t convince 22-year-old Jason Li to head to 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 Huawei’s flagship store across the street, where he eyed the Mate 60 Pro.
“I don’t want to use iOS anymore,” he said, referring to the iPhone’s operating system. “It’s a bit bland.”
Apple declined to comment.
For some in China, buying a phone has become a political statement. Debates over whether using an iPhone is disrespectful to Chinese tech companies or akin to handing over personal data to the U.S. government have erupted online. Last year, employees at some Chinese government agencies said they were told not to use iPhones for work.
The guidelines emerged less than two weeks after Huawei unveiled the Mate 60 Pro, a smartphone equipped with the company’s own operating system and a more advanced computer chip than previously made in China.
Huawei launched the device in the final days of a trip to China by Gina M. Raimondo, the U.S. Commerce Secretary. Chinese commentators and state media hailed it as 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 immediate sensation. Huawei’s sales surge continued in the first six weeks of this year, when the company claimed the second-largest share of the smartphone market, up 17 percent from 9 percent a year earlier , according to Counterpoint data.
“Today, holding the Mate 60 series gives people the feeling they had many years ago if someone saw them holding an iPhone on the street,” said Ivan Lam, principal analyst at Counterpoint Research at Hong Kong. This is especially true for people over 35, the age group that buys the most smartphones, he said.
China’s smartphone market is divided by a number of companies. National brands Vivo, Oppo and Xiaomi are jostling with Apple and Huawei for the biggest pieces.
Apple began selling iPhones in China in 2009. The last time it lost ground to Huawei, in 2019, the Trump administration inadvertently extended Apple a lifeline by blocking U.S. tech companies from dealing with Huawei. Google, which makes the Android operating system, and several semiconductor companies have stopped supporting the Chinese smartphone maker.
While Huawei struggled, Apple bounced back. In 2022, its share of phones sold in China increased to 22%, up from 9% in 2019, according to Counterpoint. Apple reported record revenue of $74 billion in the region in its fiscal year ending September 2022.
But the restrictions also forced Huawei to develop its own wireless chip and operating system, which gave rise to the technology behind the Mate 60 Pro. The operating system has attracted Chinese buyers, and many of China’s biggest tech companies have created apps exclusively for it. , further isolating users from platforms used outside of China.
Huawei’s innovation has made Apple’s latest models seem heavy in comparison. And as China’s economy struggles to recover from the Covid pandemic, many consumers are reluctant to spend on what appears to be incremental improvement. Owners of about 125 million iPhones out of 215 million in China have not upgraded to newer devices over the past three years, according to Daniel Ives, an Apple analyst at Wedbush Securities.
Apple has responded to the challenges in China. Its chief executive, Tim Cook, traveled to the country and visited Apple’s suppliers. Last week, I attended the grand opening of an 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 said it was expands its research and development laboratories in Shanghai.
But for some buyers, Apple’s efforts have been overshadowed by Washington’s approach to its Chinese rival.
While waiting at the Genius Bar for help with his ailing iPhone 12 in the Apple Store on Nanjing East Road in Shanghai, Chi Miaomiao, 38, said he had recently purchased Huawei’s Mate 60 Pro as second phone. He was attracted to Huawei after its chief financial officer, Meng Wanzhou, was arrested by Canadian authorities in 2018 at the request of the United States, which accused him 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 because of this political incident, I think we Chinese should be united,” Mr. Chi said.
Upstairs in the Apple sales area, Li Bin, 23, and two friends debate the latest iPhone models. Huawei and Apple were almost comparable in quality, Mr. Li said, and while he thought the iPhone was slightly better, it was also more expensive.
“I might upgrade to an iPhone,” Mr. Li said, “when I get richer in the future.”
Read you And Zixu Wang contributed to the research.
