Why is Apple losing patronage in China? Here are two possible reasons


Apple China

After 18 months on the sideline, Apple has finally released a new iPad series, updating the iPad Pro and iPad Air. Apple CEO Tim Cook said at the launch event: “This is the most important day since the launch of the iPad 14 years ago in 2010.” While Cook’s statement emphasizes the significance of the iPad lineup, it is clear that the iPad family does not account for a large proportion of Apple’s entire business system. The iPhone remains Apple’s flagship product and main revenue driver.

Apple logo PC import restrictions Apple China

 

However, the iPhone is no longer the dominant force in the global smartphone market that it once was. In the Chinese smartphone market in the first quarter of 2024, Apple fell out of the top five with a market share of 13.7%, joining the “others” category.

This is an unprecedented situation for Apple. In 2023, according to IDC data, Apple sold 234.6 million iPhone units, accounting for 20.1% of the global market share, surpassing Samsung as the brand with the highest smartphone sales. In just one year, the landscape has shifted dramatically, and the iPhone has fallen to its lowest point in terms of market share and sales performance

Apple’s iPhone sales are falling in China

Apple’s hardware shipments, particularly the iPhone 15 series, have continued to decline in 2024, with the company losing significant market share in mainland China. According to market research firm TechInsights, in the first quarter of 2024, China’s smartphone shipments increased by 1% year-over-year to 63.3 million units, ending 11 consecutive quarters of decline. However, Apple fell out of the top five smartphone brands in China, with a market share of only 13.7%.

The top five smartphone brands in China are all domestic manufacturers: OPPO/OnePlus (17.1%), Honor (16.7%), Huawei (16.6%), Vivo (16.1%), and Xiaomi (15.0%). Canalys, another well-known market research organization, also reported that Apple experienced the largest decline among the top mobile phone manufacturers in the first quarter of 2024, ranking fifth with 10 million units shipped, a 25% year-over-year decrease.

Apple’s second-quarter financial report for fiscal year 2024 (ending March 2024) further highlighted the decline in its iPhone business. The company achieved revenue of $90.8 billion, down 4.3% year-over-year, with the iPhone business revenue declining by 10.5% to $46 billion. The average price of iPhone shipments also decreased by 1.3% to around $917.

Why the decline in iPhone sales?

1. iPhones are no longer advanced

The iPhone was once considered the pinnacle of performance in the mobile phone industry, with each generation of A-series SoCs sparking discussions and setting a benchmark for the Android camp to catch up with. However, since Apple began differentiating iPhones by using the latest SoCs only in the Pro series, while the regular versions retained the previous generation, the concept of “advanced performance” has somewhat diminished. This strategy has boosted iPhone profits and tiered product purchases but has led to a decline in consumer perception.

iPhone 16 Pro camera

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Reports, like one from The Wall Street Journal, have highlighted a shift in Greater China where some consumers no longer view Apple’s flagship products as cutting-edge, favouring Huawei for features like camera quality, battery life, and signal strength. Huawei’s technological advancements, such as super-focusing telescopic cameras and innovative materials, have raised the bar in smartphone innovation.

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In contrast, iPhones with 60Hz screens are seen as outdated, especially as competitors like Huawei focus on AI integration, a crucial aspect of modern smartphones.

2. Apple, which lags in AI

A year after the significant popularity of the big AI model on mobile phones, Apple has shifted its focus from the car-making project to the AI field, actively showcasing its progress in the market. This move comes as major industry players like Samsung and Qualcomm are highlighting AI as a crucial differentiator to surpass Apple. Qualcomm’s CEO anticipates a global rise of AI smartphones in 2024, with Canalys projecting a substantial increase in AI phone shipments by 2027.

Chinese smartphone manufacturers, including Xiaomi, Vivo, OPPO, and Honor, have also integrated AI technology into their devices, introducing features like computational photography architectures and AI-driven operating systems. While large AI models on smartphones may not have immediate practical utility, they serve as marketing tools to enhance product appeal and drive upgrades.

Since 2023, Apple has acquired over 30 AI startups consecutively, positioning itself as the tech giant with the most acquisitions in this domain. Notably, Apple is projected to invest $4.75 billion in 2024 to purchase more than 20,000 servers to support AI technology development, a significant increase from the $620 million spent in 2023.

However, compared with AI leaders such as Microsoft, Nvidia, Google, and Meta, Apple is undoubtedly like a baby who has just learned to walk. In the field of AI, Apple may even be inferior to Samsung.

Cook said that using AI to increase the shipment volume of all Apple hardware devices is a long-term plan and a must. Cook also said, “Whether it’s the iPhone, iPad, Mac, or Vision Pro, we hope to introduce AI into them.”

AI-powered computers

However, long-term plans are of no help to Apple’s current predicament. If it wants to increase the overall shipment volume of the iPhone business, it still has to start with the present.

Conclusion

Apple’s recent release of the new iPad series, including the updated iPad Pro and iPad Air is quite good for the company. While Apple’s CEO Tim Cook emphasized the importance of this launch, the decline in iPhone sales, especially in the Chinese market, presents a new challenge. Factors contributing to this decline include perceptions of iPhone advancements, lagging in AI technology compared to competitors, and the evolving landscape of smartphone innovation. To address these challenges, Apple must focus on enhancing its products’ cutting-edge features and integrating advanced AI technologies to stay competitive.

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