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Apple lost its position as the biggest smartphone seller in China last year and fell to the third spot as domestic Chinese rivals gained market share at the iPhone maker’s cost. Vivo was the top-selling brand in the world’s second-biggest economy last year followed by Huawei whose sales have surged over the last two years.
According to data from research firm Canalys, Apple’s shipments in China fell 17% YoY in 2024 which was the biggest annual decline for the Cupertino-based company. Moreover, its shipments fell in all four quarters with the pace of decline widening to 25% in the fourth quarter.
Apple Loses the Top Spot in the Chinese Smartphone Market
Apple had a full-year market share of 15% in China last year while Huawei and Vivo respectively had a 16% and 17% share. Huawei has come up with competitively priced premium models and has grabbed significant market share from Apple.
In her note, Canalys research manager Amber Liu said, “Intense competition has led to a constantly shifting landscape, with vendors actively seeking to expand investments in their advantageous field.”
She added, “In addition to driving sales through seasonal promotions, Apple is enhancing its high-end competitiveness and user retention by improving retail experiences through channel management, offering trade-in programmes and expanding coverage of interest-free instalment plans.”
Apple Intelligence Features Are Not Available in China
Notably, Apple offered discounts on the latest iPhone 16 in China earlier this month after Huawei lowered prices on its models. Several factors seem to be hampering iPhone sales in China including the unavailability of “Apple Intelligence” features.
These artificial intelligence (AI) features were expected to be the key selling point for iPhone 16 but were launched much after the model went on sale. Also, these features are not available in China and the E.U. due to regulatory issues.
Leading Apple analyst Ming-Chi Kuo also warned of a slowdown in Apple’s sales in China. In his note last week, he said, “The 2H25 ultra-thin iPhone (with the thinnest part around 5.5mm) and the foldable iPhone, which is in the planning stage, will likely only support eSIM due to their ultra-thin design. Given that Chinese market currently does not promote phones that only support eSIM, these two models could face shipping momentum challenges unless their design is modified.”
US-China Tensions Are Working to the Deterrent of US Brands
Meanwhile, growing US-China tensions are also working to the detriment of US brands. China is increasingly becoming a tough market for foreign brands like Apple, General Motors, and Starbucks and they have been losing market share to domestic Chinese companies.
Notably, apart from being the second biggest market for Apple, China is also the key sourcing destination for the iPhone maker. However, it has been looking to increase sourcing from other Asian countries, and Foxconn, which makes most iPhones globally is expanding its footprint in India.
President-elect Donald Trump has talked about increasing tariffs on imports from China which could also hit Apple.
Apple Is Focusing on Other Asian Markets
Amid a structural slowdown in China and growing US-China tensions, Apple has been targeting other emerging economies in Asia. However, while Apple is betting on markets like India to offset the slowdown in China, the country might not be immediately able to fill the gap.
Budget handsets continue to dominate the Indian market with Samsung being the market leader. The bulk of the market is however with Chinese companies despite the ongoing troubles between the two neighbors who share a long and disputed border.
Low per capita income in India makes iPhones out of bounds for the majority of its 1.4 billion strong population. However, Apple’s volumes have risen sharply in China and the country is now among the top five markets for the company.
AAPL’s Fiscal Q4 Earnings
Apple reported revenues of $94.93 billion in its fiscal Q4 2024 which were up 6% YoY and ahead of the $94.58 billion that analysts were expecting. The company’s EPS rose 12% YoY to $1.64 and the metric was ahead of the $1.60 that analysts were expecting.
Looking at the different products, iPhone sales rose 6% to $46.22 billion and came in ahead of the $45.47 billion that analysts were expecting. However, sales of iPad and Mac were a bit shy of estimates. The company’s Services revenues came in at 24.97 billion as compared to $25.28 billion that analysts were modeling. Meanwhile, even as Apple’s overall sales grow at a healthy pace, its revenues in Greater China fell slightly to $15.03 billion in the September quarter.
While Apple’s fiscal Q4 earnings were better than expected, the company’s guidance failed to impress. Apple expects its revenues to rise by “low to mid-single digits” in the December quarter. The company expects services revenue to grow double digits in the current fiscal quarter, at a similar pace in the last fiscal year where the segment’s revenues rose 12.9%. It expects its gross margins to be between 46%-47% in the first quarter of its fiscal year 2025.
Analysts Are Mixed on Apple Stock
Wall Street analysts have been mixed on Apple stock in recent weeks and while some are apprehensive about its sales outlook – particularly in China – some others are not too perturbed.
Yesterday, Bank of America reiterated Apple stock as a “buy.” In its note, it said, “Our analysis of the teardowns of iPhone 16 Pro Max and comparison vs 15 Pro Max suggests that Apple has been very focused on driving lower costs across the Pro lines where the mix of the iPhones is steadily increasing.”
However, earlier this month, MoffettNathanson downgraded AAPL from a “neutral” to “sell” citing what it termed a “decidedly unattractive outlook.” In his note, analyst Craig Moffett said, “Much has been made of the fact that Apple’s shares have moved steadily higher over the past few months in the absence of any real news. But that’s not actually correct.”
He added, “In fact, there has been a great deal of Apple-relevant news. It’s just that all of it has been bad.” Moffett also pointed to Apple’s valuation and said, “A valuation that was already rich got richer, even as the rationale for why it was rich has taken on water.”
