For years, Apple dominated the high-end smartphone market in China. No other company made a device that could rival the iPhone’s performance — or its status as a status item in the eyes of wealthy, cosmopolitan buyers.
However, there is growing evidence that, for many in China, the iPhone no longer holds the appeal it once did. During the first six weeks of the year, historically a peak period for Chinese shoppers opening up for a new phone, iPhone sales fell 24 percent from a year earlier, according to Counterpoint Research, which analyzes the market smartphones.
Meanwhile, sales for one of Apple’s longtime Chinese rivals, Huawei, rose 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 years away from gaining traction. This month, Apple took two regulatory hits: a European Union fine of nearly $2 billion for anti-competitive music streaming practices and a US government lawsuit alleging Apple violated antitrust laws.
For a decade, China was the most important iPhone market after the United States and accounted for about 20 percent of Apple’s sales. Now the company’s grip on China could be displaced by a number of factors: slowing consumer spending, increasing pressure from Beijing on people to shun devices made by American companies and the resurgence of domestic champion Huawei.
“The golden age for Apple in China is over,” said Linda Sui, a senior director at TechInsights, a market research firm. One of the biggest reasons is the growing tension between the United States and China over trade and technology, Ms. Sui said. Without a significant reduction in geopolitical stress, it will be difficult for Apple to maintain its position.
“It’s not just for consumers,” Ms Sui said. “It’s about the big picture, the two superpowers competing against 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 handset, the iPhone 15, was released in September. It’s the first iPhone series to feature a titanium frame and includes an action button that can be programmed to take photos or turn on the flashlight.
“Five years ago, Apple had very strong branding 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 that popular.”
Six months later, Apple has plastered billboards in cities like Shanghai, reminding residents that they can still buy an iPhone 15 nearby. Similar deals helped the iPhone account for four of the six best-selling smartphones in China in the last three months of last year, the company said during a call with Wall Street analysts. But the prominent ad didn’t convince Jason Li, 22, to visit the Apple Store on Nanjing East Road in the heart of Shanghai’s commercial district when he needed to replace his iPhone 13 Pro Max.
Instead, Mr Li went to Huawei’s flagship store directly across the street, where he came up with 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 stale.”
Apple declined to comment.
For some in China, buying a phone has become a political statement. Debates about whether using an iPhone is disrespectful to Chinese tech companies or akin to handing over personal data to the US government have erupted online. Last year, employees at some Chinese government agencies reported being told not to use iPhones for work.
These instructions appeared less than two weeks after Huawei introduced the Mate 60 Pro, a smartphone equipped with the company’s operating system and a computer chip more advanced than previously made in China.
Huawei launched the device in the final days of a trip to China by Gina M. Raimondo, the US Secretary of Commerce. Chinese commentators and state media heralded it as a triumph for Huawei in the face of Washington’s efforts to restrict the company from developing the technology.
The Mate 60 Pro was an instant sensation. His boost to Huawei’s sales carried over into the first six weeks of this year, when the company claimed the second-biggest share of the smartphone market, up to 17% from 9% a year earlier, according to Counterpoint data.
“Today, holding the Mate 60 series gives people a feeling like they did many years ago if someone saw them holding an iPhone on the street,” said Ivan Lam, senior analyst at Counterpoint Research in Hong Kong. That’s especially true for people over 35, the age group that buys the most smartphones, he said.
China’s smartphone market is divided by several companies. Domestic brands Vivo, Oppo and Xiaomi are partnering with Apple and Huawei for the bigger pieces.
Apple started selling iPhones in China in 2009. The last time it was losing ground to Huawei, in 2019, the Trump administration accidentally extended Apple a lifeline by restricting US tech companies from doing business with Huawei. Google, which makes the Android operating system, and several semiconductor companies stopped supporting the Chinese smartphone maker.
As Huawei struggled, Apple rebounded. In 2022, its share of phones sold in China rose to 22%, up from 9% in 2019, according to Counterpoint. Apple reported record revenue of $74 billion from the region in the fiscal year ending September 2022.
But the restrictions also forced Huawei to develop its own wireless chip and operating system, resulting in the technology behind the Mate 60 Pro. The operating system has captivated Chinese buyers, and many of China’s biggest tech companies have created apps exclusively for it, further excluding users from platforms used outside of China.
Huawei’s innovation has made Apple’s latest models look puny by comparison. And as China’s economy struggles to recover from the Covid pandemic, many consumers are reluctant to spend on what looks like an incremental upgrade. Owners of about 125 million of the 215 million iPhones in China have not upgraded to newer devices in the past three years, according to Daniel Ives, an Apple analyst at Wedbush Securities.
Apple has responded to the challenges in China. Its CEO, Tim Cook, has traveled to the country and visited Apple’s suppliers. Last week, he attended the 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 is expanding its research and development labs 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 his ailing iPhone 12 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 pulled by Huawei after its chief financial officer, 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 operations in Iran. Ms Meng’s detention has sparked an outpouring of support in China, where many see her as a hostage.
“Huawei is our brand, and because of this political incident, I think we Chinese people should be united,” Mr Qi said.
Upstairs on Apple’s sales floor, Li Bin, 23, and two friends discussed 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 switch to an iPhone,” Mr. Lee said, “when I get richer in the future.”
Li You and Zixu Wang contributed to the research.
