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Apple has dominated China’s high-end smartphone market for years. No other company has produced a device that can match the iPhone’s performance or its status as a status object in the eyes of wealthy, international shoppers.
But there is growing evidence that for many people in China, the iPhone no longer holds the appeal it once did. iPhone sales fell 24% from a year earlier in the first six weeks of this year, historically the peak season for Chinese shoppers looking for new phones, according to smartphone market analyst Counterpoint Research.
Meanwhile, sales at Huawei, one of Apple’s longtime Chinese rivals, soared 64%.
These are difficult times for Apple. Analysts say the company’s latest product, a $3,500 virtual reality headset launched in February, is still years away from gaining mainstream appeal. This month, Apple he received two regulatory blows. One is his nearly $2 billion fine from the European Union for anticompetitive music streaming practices, and the other is a lawsuit by the U.S. government accusing Apple of violating antitrust laws.
For the past decade, China has been the iPhone’s most important market after the United States, accounting for about 20% of Apple’s sales. The company’s current grip on China could be unleashed by a series of factors, including weak consumer spending, increasing pressure from Beijing to avoid devices made by American companies, and the resurgence of domestic champion Huawei. be.
“Apple’s golden age in China is over,” said Linda Sui, senior director at market research firm Tech Insights. One of the biggest reasons is rising tensions between the United States and China over trade and technology, Sui said. Unless geopolitical stress is significantly reduced, it will be difficult for Apple to maintain its position.
“This is not just a consumer issue,” Sui says. “It’s about the big picture, two superpowers competing against each other. That’s the fundamental thing behind the whole change.”
Few U.S. companies have suffered more losses from 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 a photo or turn on a flashlight.
“Five years ago, Apple had such a strong brand in China that people brought tents and waited outside Apple Stores all night for the next product launch,” said market research firm Canalys. said Lucas Zhong, a Shanghai-based analyst. . “The iPhone 15 launch wasn’t that popular.”
Six months later, Apple put up billboards in cities like Shanghai reminding residents that they could still buy the iPhone 15 near them. The company said on a conference call with Wall Street analysts that similar promotions helped iPhones account for four of the six best-selling smartphones in China in the last three months of last year. But even with this prominent ad, Jason Li, 22, is not convinced to visit the Apple Store on East Nanjing Road in the heart of Shanghai’s shopping district when he needs to replace his iPhone 13 Pro Max. It didn’t become.
Instead, Li went to Huawei’s flagship store across the street, where he pondered the Mate 60 Pro.
Regarding the iPhone OS, he said, “I don’t want to use iOS anymore.” “It’s a little old.”
Apple declined to comment.
For some people in China, buying a mobile phone is a political statement. A debate has raged online over whether using an iPhone is disrespectful to Chinese tech companies or tantamount to handing over personal information to the U.S. government. Last year, employees at some Chinese government agencies reported being told not to use iPhones at work.
These directives come less than two weeks after Huawei unveiled its Mate 60 Pro smartphone with its own operating system and more advanced computer chips than those previously made in China. It surfaced inside me.
Huawei announced the device on the last day of U.S. Secretary of Commerce Gina M. Raimondo’s visit to China. Chinese commentators and state media reported this as a victory for Huawei in the face of US government attempts to restrict the company’s development of just such technology.
The Mate 60 Pro became an instant sensation. Huawei’s sales boost carried over into the first six weeks of this year, with the company gaining the second-largest share of the smartphone market, up as much as 17% from 9% a year earlier, according to Counterpoint data. .
“Holding the Mate 60 series today feels the same way I felt years ago if someone saw me holding an iPhone on the street,” said a senior at Counterpoint Research in Hong Kong. Analyst Ivan Lamb said. This is especially true for people over 35, the age group that buys the most smartphones, he said.
China’s smartphone market is divided among multiple companies. Domestic brands Vivo, Oppo and Xiaomi are competing with Apple and Huawei for the biggest products.
Apple began selling iPhones in China in 2009. The last time it lost ground to Huawei in 2019, the Trump administration inadvertently extended Apple’s lifeline by restricting U.S. technology companies from doing business with Huawei. Google, which develops the Android operating system, and several semiconductor companies have cut support for Chinese smartphone makers.
While Huawei struggled, Apple bounced back. According to Counterpoint, its share of mobile phones sold in China will rise to 22% in 2022 from 9% in 2019. Apple reported a record $74 billion in revenue from the region for the fiscal year ending September 2022.
But this restriction also forced Huawei to develop its own wireless chip and operating system, resulting in the technology behind the Mate 60 Pro. The operating system is appealing to Chinese shoppers, and many of China’s biggest tech companies have created apps specifically for it, further separating users from platforms used outside China. Masu.
Huawei’s innovations have made Apple’s latest models look cheap by comparison. And as China’s economy struggles to recover from the coronavirus pandemic, many consumers are hesitant to spend money on what feels like an incremental upgrade. Owners of about 125 million of China’s 215 million iPhones haven’t upgraded to a new device in the past three years, said Daniel Ives, an Apple analyst at Wedbush Securities. .
Apple has responded to China’s challenges. The company’s CEO, Tim Cook, traveled to the country to visit Apple’s suppliers. Last week, he attended a glitzy opening event for the company’s eighth Apple Store in Shanghai and 57th in China near Jing’an Temple in front of a crowd of Apple fans. The company also said it is expanding its research and development laboratory in Shanghai.
But for some shoppers, Apple’s efforts have been overshadowed by the U.S. government’s approach to the company’s Chinese rivals.
While waiting at the Genius Bar at the Apple Store on Nanjing East Road in Shanghai to have her broken iPhone 12 repaired, Qi Miaomiao, 38, recently bought a Huawei Mate 60 Pro as her second phone. he said. 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 for misleading banks about Huawei’s operations in Iran. This was after he was arrested on suspicion. Meng’s detention has aroused many supporters in China, with many viewing her as a hostage.
“Huawei is our own brand, and I think we Chinese people should unite in the wake of this political incident,” Qi said.
In the Apple department on the second floor, Li Bin, 23, and two friends discussed the latest iPhone models. Li said he thought the quality of Huawei and Apple was about the same, and that the iPhone was slightly better, but the price was also higher.
“If I become more wealthy in the future, I might switch to an iPhone,” Lee said.
Li Yu and prince contributed to research.
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