iPhone sales dive 19.1% in China as Huawei comeback hits Apple in the high end

From first place to third as local brands grow

iPhone sales in China - the world's largest smartphone market - slipped by 19.1 percent in Q1 year-over-year while many domestic brands rose, pushing Apple from first to third place.

Apple's decline came in spite of a growing Chinese smartphone market, which shifted 1.5 percent more units year-over-year and 4.6 percent more quarter-to-quarter, according to Counterpoint Research.

"Q1 2024 was the most competitive quarter ever, with only 3 percentage points separating the top six players in terms of market share," said Mengmeng Zhang, a senior analyst at Counterpoint Research.

The top three smartphone vendors in China are now Vivo, Honor in second, and Apple in third. However, Vivo and Honor didn't see the biggest gains, with the latter seeing a respectable 11.5 percent boost and Vivo mostly stagnating with a loss of 0.4 percent. Huawei was by far the biggest winner thanks to 69.7 percent higher sales than in Q1 of 2023, and its market share of 15.5 percent is just behind Apple's 15.7 percent.

Meanwhile, Xiaomi clocked in an 8.6 percent increase in sales, and Oppo's sales declined by 15.5 percent, the second-worst behind Apple.

Market share between the six biggest brands in China are now much tighter than they were in Q1 of 2023, which saw a 10 point gap between Apple and Huawei, respectively the biggest and smallest brands at the time.

One of the primary reasons China's homegrown phone brands did so well was because they dominate the lower end of the market. "Vivo gained the top spot this quarter with 17.4 percent share driven by strong sales of the Y35 Plus and Y36 models in the low-end segment and the S18 in the mid-end segment," Counterpoint Research's Ivan Lam said.

Meanwhile, Huawei's high-end smartphones like the Mate 60 are putting pressure on Apple from the other side of the market. "Apple's sales were subdued during the quarter as Huawei's comeback has directly impacted Apple in the premium segment," Lam said.

Huawei's performance might call into question Commerce Secretary Gina Raimundo's assertion that Huawei can't produce its 7nm Kirin 9000S SoCs at scale. However, it's not clear how much of a profit Huawei is turning on these 7nm chips, which are reportedly made using deep ultraviolet rather than extreme ultraviolet technology, something that could greatly impact yields and thus cost.

Chinese New Year boosted China brands, and Apple could bounce back

The report also identifies the Chinese New Year celebrations as a key reason why Apple lost so much ground, particularly in Q1. "The sales promotions during the Chinese New Year festivities were the biggest growth driver," associate director Ethan Qi said. "The average weekly sales during the four weeks leading up to the Chinese New Year saw a robust growth of 20 percent when compared to a normal week."

Obviously, Chinese New Year lasts for a very small part of the year, and may only temporarily suppress iPhone sales in the country. Counterpoint Research already sees evidence that iPhone sales are ticking back up, as Lam said: "We are seeing slow but steady improvement from week to week, so momentum could be shifting."

"For the second quarter, the possibility of new color options combined with aggressive sales initiatives could bring the brand back into positive territory; and of course, we are waiting to see what its AI features will offer come WWDC in June," Lam continued.

Though, Reg readers shouldn't expect Apple or Tim Cook to predict they'll be back in the green in China any time soon; they only just settled a $490mn lawsuit over the last time they claimed iPhone sales were good in China when they very much weren't. ®

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