Apple is facing challenges in China？

Apple's position in the Chinese market is increasingly under pressure, facing more and more challenges.

According to Canalys data, while the overall Chinese smartphone market grew by 4% with an increase of 12.1 million units, Apple saw a decline in sales. In 2024, Apple’s shipments in China dropped to 42.9 million units, a 17% year-on-year decrease. This is in stark contrast to Huawei, whose shipments grew by 37%, reaching 46 million units. Over the past year, Apple’s sales in China decreased by nearly 9 million units, reflecting its gradual loss of market share in China.

To address this situation, Apple CEO Tim Cook visited China again in late November 2024.

While publicly the visit was for local events, insiders revealed the true purpose was to discuss cooperation with China’s tech giants, especially in the area of generative AI.

In fact, Cook had visited China multiple times in 2024, including talks with the Chinese government on AI data management. Since the Chinese government has not approved foreign companies to conduct generative AI business locally, Apple’s “Apple Intelligence” service cannot be launched in China.

As a result, Apple has had to collaborate with local AI companies, such as ByteDance, to boost its competitiveness in the Chinese market.

Furthermore, Apple’s revenue share from China has continued to decline. In fiscal year 2024, Apple’s global revenue reached $391 billion, a 67% increase from $233 billion in 2015. However, while the U.S. and European markets grew substantially, growth in Greater China was only 14%, with Apple’s share of total revenue falling from 25% to 17%. This indicates that Apple's market dominance in China has significantly weakened.

To cope with its challenges in China, Apple reduced the price of the iPhone 16 series in early 2024, with discounts of up to 500 RMB.

For a company renowned for its premium brand image, such large-scale price cuts on its official website are rare. This not only reflects Apple's anxiety in the Chinese market but also suggests that the company is resorting to extraordinary measures to counter declining sales. However, whether this price reduction can reverse the trend remains uncertain.

As for why Apple continues to struggle to reduce its dependency on the Chinese market, one of the key reasons is that it has not effectively expanded into emerging markets. Cook has long emphasized that the iPhone’s user base is expanding, particularly in emerging markets.

However, over the past decade, even though sales in Europe and the U.S. compensated for the decline in China, Apple’s expansion in emerging markets has been slow.

According to IDC data, Apple’s share of shipments in the “Other Asia-Pacific” region (its key emerging markets) has fallen from 5% in 2015 to 4% in 2024 (January–September). The main reason is the high cost of the iPhone.

In 2024, the average price of an iPhone surpassed $1,000, a 40% increase compared to 2015. This price is almost 3.5 times the average of other smartphones ($295). While the higher price has boosted Apple’s profit, it has significantly hampered further growth in sales.

As the smartphone market matures, the iPhone still maintains a gross margin of about 50%, which appears solid on the surface. However, Apple’s profit structure is still heavily reliant on the iPhone, and it has yet to escape the “single-product profit” dilemma.

It’s worth noting that since the iPhone's release in 2007, Apple has not introduced a revolutionary product like the iPhone. Although the company has ventured into smartwatches and smart glasses, these products have not created the same market frenzy as the iPhone did. Additionally, Apple has even abandoned its EV development, showing that these innovations have not achieved the level of impact Apple once commanded.

Meanwhile, the global smartphone technology battlefield has shifted to China. Innovations like foldable screens, under-display cameras, and high-end designs are increasingly originating from China, with companies like Huawei and Xiaomi dominating the domestic market and actively expanding globally, showcasing China’s technological prowess.

As one Japanese senior executive pointed out, “Apple releases a new product once a year, but Chinese smartphone makers have a shorter development cycle and can continuously try new features.” This illustrates Chinese companies’ agility in responding to market changes and the growing pressure Apple faces in global competition.

In conclusion, Apple’s decline in China is not accidental, but rather the result of multiple factors, including its pricing strategy not working in emerging markets and lack of innovation. As Apple faces unprecedented challenges, particularly in China, the company’s ability to maintain competitiveness and find new growth avenues will be critical to whether it can sustain its leadership in the coming years.