Apple Inc. (AAPL) is facing a significant challenge in China, a crucial market for the tech giant. The company’s market share has dropped to sixth place from third in the second quarter of 2024, as local players gain momentum.
According to Canalys, Apple’s market share in China fell to 14%, down by two basis points year-on-year. This decline comes amidst growing uncertainty about the availability of Apple’s AI features in the country.
Meanwhile, the Chinese smartphone market saw a 10% year-on-year growth, reaching over 70 million units in the second quarter. Vivo emerged as the market leader with a 19% share, shipping 13.1 million units. This success was driven by strong offline channel performance and robust online sales during the Chinese e-commerce festival. OPPO followed closely in second place with a 16% share, shipping 11.3 million units.
HONOR secured third place with a 15% share, shipping 10.7 million units, representing a 4% year-on-year growth. Huawei Technologies Co. captured the fourth spot with a 15% share, fueled by a 41% year-on-year increase in shipments to 10.6 million units. Xiaomi Corp rounded out the top five, securing a 14% market share with shipments of 10 million units, marking a 17% year-on-year growth.
The success of these local brands can be attributed to their early adoption of significant discounts and promotions, combined with enhancements to their offline channels. They are also strategically tapping into the Chinese premium smartphone market by integrating generative artificial intelligence (AI) and leveraging their deep collaboration with regional supply chains.
Canalys also highlighted Apple’s difficulties in maintaining adequate inventory levels, keeping retail prices in check, and ensuring the profitability of its channel partners. Furthermore, the launch of Huawei’s $2,800 Mate XT trifold phone on September 20 coincides with the release of the iPhone 16 models, adding to the competitive pressure.
International Data Corporation (IDC) anticipates global smartphone shipments to increase by 5.8% to 1.23 billion units in 2024, marking a recovery driven by generative AI. However, the intense competition in China is expected to favor Android growth over Apple iOS. IDC emphasizes that Apple’s success hinges on its ability to forge strategic AI partnerships within China.
Ivan Lam, a senior analyst at Counterpoint Research, suggests that iPhone market share in the premium segment will likely decline as Huawei and other Chinese brands gain traction. Apple’s lack of revealed AI plans for China could put it at a disadvantage in the race to implement AI, according to Canalys analyst Lucas Zhong. However, Lam acknowledges that pent-up demand for iPhone upgrades may still contribute to sales growth in China.
While Apple’s current situation in China poses challenges, the company’s ability to adapt and respond to the evolving market dynamics will be crucial to its long-term success.
