China not as interested in the iPhone as it used to be
Second largest market for Apple cools on product
TAIPEI, TAIWAN >> For years, Apple dominated the market for high-end smartphones in China. No other company made a device that could compete with the iPhone's performance — or its position as a status object in the eyes of wealthy, cosmopolitan shoppers.
But evidence is mounting that, for many in China, the iPhone no longer holds the appeal it used to. During the first six weeks of the year, historically a peak season for Chinese shoppers to spring for a new phone, iPhone sales fell 24% from a year earlier, according to Counterpoint Research, which analyzes the smartphone market.
Meanwhile, sales for one of Apple's long-standing Chinese rivals, Huawei, surged 64%.
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 appeal. This month, Apple has taken two regulatory hits: a European Union fine of nearly $2 billion for anti-competitive music streaming practices and a U.S. government lawsuit claiming Apple violated antitrust laws.
For a decade, China has been the iPhone's most important market after the United States and accounted for roughly 20% of Apple's sales. Now, 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 shun devices made by U.S. companies and the resurgence of national champion Huawei.
“The golden time 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 rising tension between the United States and China over trade and technology, Sui said. Without a significant lessening of geopolitical stress, it will be difficult for Apple to retain its position.
“It's not just about consumers,” Sui said. “It's about the big picture, the two superpowers competing with each other — that's a fundamental thing behind the whole shift.”
Few American companies have more to lose from these heightened tensions than Apple, whose newest handset, the iPhone 15, went on sale in September. It is the first iPhone line to feature a titanium frame and include 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 would bring tents to wait through the whole 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 plastered billboards across cities such as Shanghai, reminding residents they can still buy an iPhone 15 nearby. Similar promotions helped the iPhone account for four of the six top-selling smartphones in China in the final three months of last year, the company said during a call with Wall Street analysts. But the prominent advertising did not persuade Jason Li, 22, 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, Li went to the Huawei flagship store directly across the street, where he contemplated 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 stale.”
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 personal data over to the U.S. government have erupted online. Last year, employees at some Chinese government agencies reported being told not to use iPhones for work.
These directives surfaced 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 had previously been made in China.
Huawei released the device in the final days of a trip to China by U.S. Commerce Secretary Gina Raimondo. Chinese commentators and state media heralded it as a triumph for Huawei in the face of Washington's attempts to restrict the company from developing just such technology.
The Mate 60 Pro was an immediate sensation. Its boost to Huawei's sales carried over into the first six weeks of this year, when the company claimed the second-largest share of the smartphone market, up to 17% from 9% a year earlier, according to data from Counterpoint.
“Today, holding the Mate 60 series gives people a feeling like they had many years ago if someone saw them holding an iPhone on the street,” said Ivan Lam, a senior analyst at Counterpoint Research in Hong Kong. This is especially true for people older than 35, the age group that buys the most smartphones, he said.
China's smartphone market is divided up by a number of companies. The domestic brands Vivo, Oppo and Xiaomi jostle with Apple and Huawei for the largest pieces.
Apple started selling iPhones in China in 2009. The last time it was losing ground to Huawei, in 2019, the Trump administration inadvertently extended Apple a lifeline by restricting U.S. technology firms from dealing with Huawei. Google, which makes the Android operating system, and several semiconductor companies cut off their support of the Chinese smartphone maker.