Why is Apple losing patronage in China? Here are two possible reasons

After an 18-month absence, Apple has finally released a new iPad series, revamping the iPad Pro and iPad Air. Apple CEO Tim Cook said at the launch event, “This is the most important day since the launch of the iPad 14 years ago in 2010.” While Cook’s statement emphasized the importance of the iPad range, it is clear that the iPad family does not represents a large part of Apple’s entire business system. The iPhone remains Apple’s flagship product and a major driver of revenue.

However, the iPhone is no longer the dominant force in the global smartphone market that it once was. In the Chinese smartphone market in the first quarter of 2024, Apple dropped out of the top five with a market share of 13.7%, joining the “others” category.

This is an unprecedented situation for Apple. In 2023, according to IDC data, Apple sold 234.6 million iPhones, accounting for 20.1% of the global market share, overtaking Samsung as the top-selling smartphone brand. In just one year, the landscape changed dramatically and the iPhone fell to its lowest point in terms of market share and sales

Apple’s iPhone sales fall in China

Apple’s hardware shipments, especially the iPhone 15 series, continued to decline in 2024, with the company losing significant market share in mainland China. According to market research firm TechInsights, smartphone shipments in China rose 1% year-on-year to 63.3 million units in the first quarter of 2024, ending 11 consecutive quarters of decline. However, Apple dropped out of the top five smartphone brands in China with a market share of just 13.7%.

The top five smartphone brands in China are domestic manufacturers: OPPO/OnePlus (17.1%), Honor (16.7%), Huawei (16.6%), Vivo (16.1%) and Xiaomi (15.0%). ). Canalys, another well-known market research organization, also reported that Apple suffered the biggest decline among leading mobile phone manufacturers in the first quarter of 2024, ranking fifth with 10 million units shipped, down from 25% on an annual basis.

Apple’s financial report for the second quarter of fiscal 2024 (ending March 2024) further highlighted the decline in the iPhone business. The company posted revenue of $90.8 billion, down 4.3% year-on-year, with revenue from its iPhone business down 10.5% to $46 billion. The average iPhone shipping price also fell 1.3% to about $917.

Why the decline in iPhone sales?

1. iPhones are no longer advanced

The iPhone was once considered the pinnacle of performance in the mobile phone industry, with each generation of A-series SoCs sparking debate and setting a benchmark for the Android camp to catch up to. However, as Apple began to differentiate the iPhone by using the latest SoCs only in the Pro series, while the regular versions kept the previous generation, the concept of “advanced performance” somewhat diminished. This strategy increased iPhone profits and differentiated product purchases, but led to a decline in consumer perception.

Reports, such as one from The Wall Street Journal, highlighted a shift in Greater China, where some consumers no longer view Apple’s flagship products as cutting-edge, preferring Huawei for features such as camera quality, battery life and signal strength. Huawei’s technological advances, such as super-focusing telescopic cameras and innovative materials, have raised the bar in smartphone innovation.

In contrast, iPhones with 60Hz screens are considered outdated, especially as rivals like Huawei focus on integrating AI, a key aspect of modern smartphones.

2. Apple lagging behind in AI

A year after the significant popularity of the large AI model of mobile phones, Apple has shifted its focus from the car manufacturing project to the field of AI, actively demonstrating its progress in the market. The move comes as major industry players such as Samsung and Qualcomm highlight AI as a crucial differentiator to surpass Apple. Qualcomm’s CEO expects global growth in AI smartphones in 2024, with Canalys predicting a significant increase in AI phone shipments by 2027.

Chinese smartphone makers including Xiaomi, Vivo, OPPO and Honor have also integrated AI technology into their devices, introducing features such as computational photography architectures and AI-driven operating systems. While large smartphone AI models may not have immediate practical utility, they serve as marketing tools to enhance product appeal and drive upgrades.

As of 2023, Apple has has acquired over 30 AI startups consistently, positioning itself as the tech giant with the most acquisitions in the field. Notably, Apple is expected to invest $4.75 billion in 2024 to purchase more than 20,000 servers to support the development of AI technology, a significant increase from the $620 million spent in 2023.

However, compared to AI leaders like Microsoft, Nvidia, Google and Meta, Apple is undoubtedly like a baby that has just learned to walk. In the field of AI, Apple may even be lagging behind Samsung.

Cook said that using AI to increase the volume of shipments of all Apple hardware devices is a long-term plan and a must. Cook also said, “Whether it’s iPhone, iPad, Mac or Vision Pro, we hope to bring AI to them.”

However, long-term plans are not helpful for Apple’s current predicament. If it wants to increase the overall iPhone shipment volume of the business, however, it must start with the present.

Conclusion

The recent release of the new iPad series from Apple, including the updated iPad Pro and iPad Air, has been pretty good for the company. While Apple CEO Tim Cook stressed the importance of this launch, the decline in iPhone sales, especially in the Chinese market, presents a new challenge. Factors contributing to this decline include the perception of the iPhone’s progress, AI technology lagging behind competitors, and the evolving landscape of smartphone innovation. To address these challenges, Apple must focus on improving the most advanced features of its products and integrating advanced AI technologies to remain competitive.