iPhone Losing Appeal in China as Huawei Gains Market Share

In recent years, Apple has maintained its dominance in the premium smartphone market in China. No company has been able to produce a device that can compete with the iPhone, which is known as the “phone of the wealthy.”

However, the iPhone is no longer as appealing as it once was. According to Counterpoint Research, a market analysis firm, in the first six weeks of the year when Chinese consumers typically rush to buy new phones, iPhone sales dropped by 24% compared to the previous year. Meanwhile, Huawei, one of Apple’s long-standing competitors in China, saw a 64% increase in sales.

This is a challenging time for Apple. Analysts say that the company’s latest product, a $3,500 virtual reality headset, will take many years to prove its appeal. Additionally, Apple has been hit with a nearly $2 billion fine from the European Union, facing allegations of antitrust violations.

For a decade, China has been Apple’s most important market, accounting for 20% of its sales. However, things have changed. From the government’s side, there is increasing pressure, and consumers are becoming indifferent to devices coming from the US. The national champion, Huawei, has made a comeback.

“The golden age of Apple in China is over,” said Linda Sui, a senior director at TechInsights, a market research company. She added that unless there is a significant reduction in geopolitical tensions, Apple will struggle to maintain its position. “It’s not just about consumers. It’s about the bigger picture when two superpowers are competing,” Sui explained.

Lucas Zhong, an analyst at Canalys, a market research firm based in Shanghai, stated, “Five years ago, Apple was a really strong brand in China. People would camp outside the Apple Store overnight for the next new product launch.” However, the recent design of the iPhone 15 doesn’t seem to have much appeal.

For the past six months, iPhone 15 advertisements have been plastered all over major cities, but they failed to convince 22-year-old Jason Li to replace his iPhone 13 Pro Max. Instead, he decided to invest in the stylish Mate 60 Pro.

“I don’t want to use iOS anymore,” Li said, referring to the iPhone’s operating system. “It’s a bit outdated.”

For some Chinese users, buying a phone is connected to government factors. They are afraid of being tracked by the US government, while others are prohibited from using iPhones for work purposes.

At the same time, Huawei launched the Mate 60 Pro, a smartphone equipped with its own advanced operating system and cutting-edge computer chip. The product quickly gained the attention of the younger generation, including Jason Li.

According to Counterpoint’s data, Huawei now holds the second-largest market share in the smartphone market, increasing to 17% compared to 9% the previous year. Ivan Lam, a senior analyst at Counterpoint Research in Hong Kong, stated, “Today, the Mate 60 gives users the same feeling as the older iPhones. This is particularly true for people over 35, the age group that buys the most smartphones.”

Apple started selling iPhones in China in 2009. The restrictions imposed by former US President Donald Trump on US tech companies transacting with Huawei at that time were like “opening the door” for iPhones. Google, the company behind the Android operating system, and other semiconductor companies also cut ties with the Chinese smartphone manufacturer.

According to Counterpoint, in 2022, Apple’s market share of smartphones sold in China increased to 22% from 9% in 2019. Apple reported record revenue of $74 billion from this region in the fiscal year ending in September 2022.

However, those restrictions forced Huawei to develop its own wireless chips and operating system, the technology behind the Mate 60 Pro. This significant leap made the latest Apple models look outdated when compared to “home-grown” Huawei.

According to Daniel Ives, an analyst at Wedbush Securities, about 125 million out of the total 215 million iPhones in China have not been upgraded in the past three years. Chi Miaomiao is one of those users who decided to buy the Huawei Mate 60 Pro while waiting for her iPhone 12 to be repaired at the Apple Store. “Huawei is our brand. I believe we, the Chinese people, should unite,” she stated.

Facing pressure from domestic products, the price of the iPhone 15 in the Chinese market has been adjusted to a reduction of more than 1,000 yuan. Experts believe that this significant discount reflects the increasing pressure that Apple is facing in the world’s most populous market.

According to Guo Tianxiang, a senior analyst at market research firm IDC China, Apple is becoming increasingly aware of the clear competition from manufacturers like Huawei. “iPhone sales have been weak since the beginning of the year. Meanwhile, premium Android competitors with prices over 4,000 yuan have been well-received,” Tianxiang explained.

Source: Business Today