Apple iPhone Sales Drop 24% in China, Huawei Up 64%

Key Takeaway

• Apple's iPhone sales in China plummeted by 24% in the first six weeks of 2024, causing a >2% drop in its shares.
• Huawei's resurgence, with a 64% increase in smartphone shipments, intensifies competition for Apple amidst U.S. sanctions.
• Despite regulatory challenges and market competition, Apple reaffirms its commitment to China with CEO Tim Cook's strategic visit.

iPhone Sales Decline in China

Apple's iPhone sales have experienced a significant drop in China during the first six weeks of 2024, with a 24% decrease reported by Counterpoint Research. This downturn in sales has led to a more than 2% decline in Apple shares in early U.S. trading. The tech giant is facing intense competition from local smartphone manufacturers, notably Huawei, which has seen a resurgence with its Mate 60 smartphone. Despite the overall market downturn, Huawei and its spinoff Honor were the best-performing brands in the period, with Huawei's smartphone unit shipments increasing by 64% year over year.

Competition Intensifies

The competitive landscape in China's smartphone market is becoming increasingly challenging for Apple. Local brands such as Oppo, Vivo, and Xiaomi also experienced declines in unit sales, though not as steep as Apple's. Huawei's comeback, marked by the launch of the Mate 60 smartphone with 5G connectivity, has been a significant factor. This resurgence is notable given the U.S. sanctions in 2019 and 2020 that cut Huawei off from key chips and technology. Neil Shah, an analyst at Counterpoint Research, highlighted that Huawei is attempting to win back customers who had shifted to iPhone, indicating a shift in the premium segment dynamics.

Apple's Strategic Moves

In response to the sales decline and competitive pressures, Apple CEO Tim Cook visited Shanghai, signaling the company's commitment to the Chinese market. During his visit, Cook inaugurated a new retail store in the Jing’an district and engaged with local officials and key suppliers. This visit comes amid reports of declining iPhone sales and increased competition, particularly from Huawei. Apple's efforts to reaffirm its presence in China were further underscored by a meeting between Cook and China’s Minister of Commerce Wang Wentao, where the long-term investment plans in China were discussed.

Regulatory and Market Challenges

Apple's challenges in China are compounded by regulatory pressures in the U.S. and EU. The U.S. Department of Justice recently sued Apple, alleging monopoly practices, while the EU has opened an investigation into the company's anti-steering rules. Despite these challenges and the sales downturn in China, Apple remains the country's biggest smartphone supplier as of last year. The company's strategy to navigate the tough macro environment and competition, especially before the iPhone 16 release, is critical for its future performance in the Chinese market.

Street Views

• Neil Shah, Counterpoint Research (Neutral on Apple):

  "Huawei is making a come back trying to win back the defectors to iPhone from a couple of years ago... There is some erosion for Apple but more so it’s other non-Apple brands in the premium segment also feeling the heat from Huawei."