Apple and the story of declining revenue in the Chinese market

Increased competition from rivals in China, coupled with the prospect of more cautious consumer spending amid an economic slowdown, has stifled Apple's growth in China, sending sales down 13% in December to $20.8 billion.

“Apple’s decline in sales in China is not surprising as it faces strong competition from local brands such as Huawei and Xiaomi,” said Toby Zhu, an analyst at research group Canalys.

Apple did not respond to a request for comment.

Some analysts believe Apple could post its fifth quarterly decline when it reports its Christmas sales in the coming weeks, which would be its longest losing streak since 1998.

As the world's largest smartphone market, China is crucial to Apple's sales growth. For years, Apple has been the premium phone brand of choice in the billion-person market, but the situation is now changing.

Pressure on Apple increased in the second half of the year after Huawei returned to the high-end smartphone market with its Mate 60 series phones powered by domestically produced chips.

Other top Android brands like Xiaomi are also making inroads into the premium space that Apple has traditionally dominated.

Xiaomi launched its premium Mi 14 in October 2023, touting long battery life and superior camera capabilities. The company sold 1 million smartphones within a week of its launch.

Chinese manufacturers are gradually penetrating Apple's core price segment by introducing higher-priced foldable products, said Canalys analyst Toby Zhu.

Chinese consumers also complained about the lack of innovation in Apple's iPhones, especially in terms of aesthetic design compared to previous versions.

“Another hurdle that Apple needs to overcome is how to bring more wow factor to buyers and maintain its image as a technology pioneer,” said Will Wong, a smartphone analyst at IDC. “This is especially important as other Android vendors are now bringing foldable devices and AI technology to their products.”

At the same time, Chinese customers tend to be slow to change their electronics because of the economic downturn.

Apple has been trying to boost sales of the iPhone 15 series in China, including offering rare price cuts ahead of the Lunar New Year holiday.

The October price cuts appear to have only halted the decline, with Apple's phone sales falling just 2.1% in the final quarter of 2023, while Huawei's sales rose 36.2%, according to data from research group IDC.

Apple is likely to continue to face pressure in China in the near term, with Jefferies analysts predicting that Apple's sales in China will decline by double digits by 2024.

Apple is also losing ground in the low-end segment of the Chinese market, with consumers who had intended to buy older iPhone models switching to domestically produced products.