iPhone Sales in China Plunge by 30%: What's the Main Cause? What Other Information is Worth Noting?

On January 8th, Caixin reported (Editor: Xia Junxiong) that according to analysts from the American investment bank JPMorgan, the downward trend in sales of Apple’s iPhone in the Chinese market is intensifying, and iPhone sales in China may further decline this year. Analysts like Edison Lee cited industry surveys in their report, stating that the latest iPhone 15 series released by Apple in September last year had a poor start in sales in China, with a year-on-year decline recently expanding to 30%. In contrast, the sales of other brands in the Chinese smartphone market increased last month, especially Huawei, which launched the Mate 60 series. Huawei released the Mate 60 series of smartphones at the end of August last year. JPMorgan estimates that Huawei’s smartphone shipments in 2023 will reach 35 million units. In December last year, iPhone sales saw a double-digit percentage decline, and JPMorgan predicts a similar decline in Apple’s iPhone sales in 2024. Last week, major online shopping websites increased discounts on iPhones, lowering the average selling price, but failed to stimulate sales growth. The iPhone can be said to be Apple’s most important product, with about half of the company’s revenue coming from iPhones. Apple’s revenue for the fourth quarter of the 2023 fiscal year (the third quarter of the calendar year) was $89.5 billion, with revenue from iPhones totaling $43.805 billion. Last week, both Barclays and Piper Sandler downgraded Apple’s stock rating, with both investment banks pessimistic about iPhone sales this year. As a result of the rating downgrade, Apple’s stock price fell for four consecutive trading days last week (Monday being New Year’s Day), with a total market capitalization loss of nearly $170 billion. Including the last trading day of last year, Apple’s stock price has fallen for five consecutive days. As of the closing price last Friday, Apple’s stock price has fallen nearly 10% from its all-time high closing price set in mid-December last year, currently at $181.18 per share, with a total market capitalization of $2.81 trillion. With Apple’s stock price continuously falling, Microsoft is poised to reclaim the title of the world’s most valuable company, with its current market capitalization at $2.73 trillion. Since July 2022, Apple has been the world’s most valuable publicly traded company, with the company’s market capitalization surpassing $3 trillion in the middle of last year, making it the first company to achieve this milestone. (Source: Caixin) {Read more}

The iPhone 15 Pro Max priced at 8,000 is a legendary device, fully loaded with sincerity.

The iPhone 15 pm, costing 10,000, is industrial trash. It has poor heat dissipation, an odd focal range, and low-frequency flashing that is blinding.

This year’s iPhone should either fully load up on materials, using large cores in the chip for enhanced performance, upgrade all cameras to 48 million pixels, increase the memory by 2GB, and bring the digital version chip and the P series up to the same generation.

Otherwise, they should reduce the prices across the board by 1,000 to 2,000, with storage starting from 256GB.

Apple, now lacking in innovation, still sees 70% of its sales even with its reluctance to squeeze the toothpaste tube, indicating that the Apple’s exterior is so smooth that even a mosquito would slip on it.

The affordability of A17Pro is not the issue; it’s the MediaTek Dimensity 9300’s better value proposition.

The most basic A16, even with 8+ gen3, isn’t that powerful, is it?

For a similar performance, you can now get an 8+ gen2 for as low as ¥2299.

Of course, in terms of theoretical smoothness, Apple still leads in multi-core scheduling, but can it keep up with the 60Hz refresh rate on the standard version’s screen?

You should know that even budget Android phones now come with a 120Hz refresh rate.

Apple is too arrogant; besides pleasing its fans, regular consumers should prioritize their overall experience.

The Dilemma of Sticking with Apple

Now, every year, Apple releases a new iPhone with minor functional and performance upgrades, making it seem like a change in the shell only. Furthermore, Apple is actively pushing its supply chain to reduce the proportion of Chinese components in its phones, which raises the question: Should you still stick with Apple?

Even back in 2018, when the U.S. initiated its trade war with China, there were calls in China to boycott and sanction Apple. However, I strongly opposed this antagonistic stance towards Apple for a couple of reasons:

  1. While Apple takes a significant share of the profits, its supply chain supports numerous Chinese component companies like Goertek, Changying Precision, Luxshare Precision, and AAC Technologies, which in turn provide employment and contribute to tax revenues. At that time, Apple’s success and the Chinese market were interdependent.

  2. Apple has historically maintained a friendly relationship with China, positioning itself as a mediator between the U.S. Congress and the U.S. government when necessary.

But today, the proportion of Chinese-made components in Apple’s phones is only 2%! This is the result of Apple heeding the call of the U.S. government to actively shift its supply chain away from China and reduce the proportion of Chinese components in its phones.

In the latest iPhone 15 series, the breakdown of components by different countries and regions was analyzed in collaboration between the Japan Economic News and the disassembly organization Fomalhaut Techno Solutions. The results show that the proportion of U.S. components is approximately 33%, making it the largest contributor, followed by South Korean components at around 29%, with a 5% increase. Japanese components maintain a 10% share, ranking third. Meanwhile, the proportion of components supplied by Taiwan, China, has significantly increased to 9%, whereas components from mainland China have dwindled to just 2%.

This data indicates that Apple’s supply chain is gradually shifting away from China to other countries and regions. Compared to previous years, the proportion of Chinese components has been steadily declining. Reportedly, in the iPhone 13 series, Chinese components accounted for 4.5%, the iPhone 14 series had 3.8%, and the iPhone 15 series has dropped to 2%. In contrast, the proportion of U.S. components has been steadily increasing over the same period, reaching 22.6% for the iPhone 13 series, 32.4% for the iPhone 14 series, and 33% for the iPhone 15 series.

In this world, it’s hard to find a situation where one entity reaps all the benefits and profits without being willing to share even a fraction of the gains with its customers and the country where the market exists.

Indian Quality, Worth Possessing

Recently, wasn’t there a lot of talk about “top in sales,” “overwhelming others,” and “only available at a premium”?

Is that moment over?

Xiaomi: Rumors About the CEO Venturing into Car Manufacturing - Is Xiaomi in Trouble?

In Q4 2023, the rankings for the Chinese smartphone market were released with key highlights:

  1. The top 3 positions are held by Apple, Xiaomi, and Huawei.

  2. Xiaomi and Huawei saw the most significant growth in market share. Xiaomi maintained the top spot in domestic smartphone sales from November to December and secured the first position among domestic brands in Q4, while ranking second overall.

  3. Apple’s activation rate in December was only 0.18% higher than Xiaomi’s, narrowing the gap further, making it susceptible to being overtaken.

Additional information for our knowledgeable friends:

Last Sunday, the renowned financial firm JFR released a report, indicating that in the first week of 2024, iPhone sales in the Chinese market plummeted by 30%. Surprisingly, this decline in iPhone sales was not due to an overall decrease in the Chinese smartphone market; on the contrary, Huawei and Xiaomi smartphones were on the rise during the same period.

In fact, the core reason for the sharp decline in iPhone sales in the Chinese market is well known to the Chinese people: Huawei made a strong comeback in late August last year with its self-developed and self-manufactured Mate 60 Pro. After a thorough examination of the relevant data, the Tenth Economic Observation Room found that in the fourth quarter of last year, the resurgent Huawei smartphones achieved a sales volume of 11.46 million units in the Chinese market, a staggering year-on-year increase of 79.3%. In contrast, Apple sold 15 million units, marking a significant year-on-year decline of 10.6%.

It’s worth noting that the fourth quarter of each year is the peak season for Apple’s new product sales. This year, in response to the challenge posed by Huawei smartphones, Apple engaged in an unprecedented price reduction and promotion campaign but still couldn’t prevent the decline in sales. It is evident that the high-end smartphone market in China is highly competitive, with Huawei selling one more unit equating to one less for Apple. The 30% drop in iPhone sales in the first week of 2024 is simply an extension of last year’s continuous decline in iPhone sales. JFR predicts that in 2024, due to a chilly reception in the Chinese market, Apple’s global sales will decline by 8.5%.

Multiple Factors:

  1. The mobile phone industry no longer has sufficient innovations to attract users, and the replacement cycle for users is gradually extending.

  2. The squeeze on Apple toothpaste is getting less and less, and many people are gradually unable to accept it.

  3. The Chrysanthemum Factory successfully broke through the chip blockade and made a comeback.

  4. The Xiaomi 14 series has achieved some breakthroughs. If the 15 series continues to improve or even surpasses it, it will naturally affect the sales that originally belonged to the iPhone.

The primary reason is that the remote farming industry in the United States is very robust, and both curry apples can maintain 70% of their sales.

To know that the mobile phone market is growing steadily. So, three reasons, three sentences, plus one chart to illustrate:

  • The first reason, the release of the Huawei Mate60 series;
  • The second reason, the release of the Xiaomi 14 series;
  • The third reason, the migration of the Apple supply chain to India (Note: Think about it carefully).

Apple Lacks Cost-Effectiveness

The cost-effectiveness of Apple products is not high.

The cost-effectiveness of Apple smartphones is far from that of Xiaomi and Huawei.

With Huawei’s comeback, it is gradually regaining lost ground.

If Huawei’s production capacity can be increased, Apple will face even more decline.

If the United States lifts its ban on Huawei, it can allow Huawei smartphones to be sold in the United States.

Apple is estimated to face swift challenges.

Certainly, some may ask where the cost-effectiveness of the Mate 60 Pro comes from.

In just one sentence, can that phone make satellite calls now?

You might say, “XXXX.”

In any case, satellite calling may be a function used only once in a lifetime.

But using it once can extend your lifetime.

Of course, many people say life is invaluable, and to that, I have no response!

Apple Faces Multiple Challenges in the Market

On one hand, Apple’s own products have remained relatively stagnant. Annual product updates follow a routine pattern, and it appears that the company’s strategy has shifted from innovation-driven to profit-driven. Therefore, Apple’s current focus is on increasing profits rather than creating more innovations. Years of incremental updates have led to a qualitative change, breaking the previous perception that Apple represents high technology, new features, and superiority. It has shifted from “buying an Apple product is always a good choice” to “buying an Apple product is essential for staying within the Apple ecosystem,” which marks a significant difference.

On the other hand, the return of China’s high-end brand, Huawei, has posed a significant challenge to Apple. While it may not have completely overshadowed Apple as it did in the past, it is expected to regain some of its market share, contributing to Apple’s lower sales.

Thirdly, Xiaomi’s efforts in the high-end market have started to bear fruit. New high-end players have once again captured a portion of Apple’s user base. Brands like VIVO and OPPO are gradually strengthening their positions, offering Pro/Pro+/Ultra models with similar or competitive prices compared to Apple’s standard versions while providing more premium features. This has naturally impacted Apple’s sales.

Fourthly, the deteriorating relations between China and the United States have heightened Chinese consumers' preference for domestic products. With China’s growing economic strength and cultural appeal, consumers are increasingly inclined to make patriotic purchase decisions in various sectors, including movies, consumer electronics, and more. This has partially affected Apple’s market presence.

Finally, Apple’s ecosystem has started to show signs of stagnation. For example, iCloud has faced criticism due to various logical issues, and even once-reliable features like Airdrop have become somewhat unreliable, with sudden connectivity issues and mysterious “rejected” errors. These factors undoubtedly influence consumer decisions when considering Apple products.

Challenges Beyond Apple: Performance Oversupply and Technological Bottlenecks

Setting aside some market-specific reasons, the fundamental challenges faced by Apple and other smartphone manufacturers can be attributed to two key factors: excessive performance and technological bottlenecks.

Excessive performance is self-evident. With the iPhone now in its 15th iteration, using a model as old as the 12 or 11 seems to satisfy most users' needs. In the past, when a new iPhone was released, scalpers would queue up to purchase it. Why? Because there was substantial market space to fill. However, over the years, even a single individual in China owning two smartphones has become commonplace, diminishing the available market space. Furthermore, most people do not replace their phones after just one year, and the surplus of performance has led to longer phone lifecycles, reducing the demand for new devices.

The second challenge, closely linked to excessive performance, is the technological bottleneck. Hardware innovations have stagnated over the years, preventing significant breakthroughs and innovations. Consequently, this has hindered the implementation of new software features, creative ideas, and applications. As a result, users lack the motivation to upgrade their devices. Even when it comes to design, there have been no groundbreaking innovations. How can manufacturers encourage users to switch to new models?

These issues are not unique to Apple; they are shared by many smartphone manufacturers. However, given Apple’s higher pricing and comparatively lower motivation for upgrades, these challenges are more pronounced in its case.

Analyzing Apple’s Market Challenges and Opportunities

Let’s take a simple look at the data source without any disguise.

In the first week of 2024, sales declined by 30%. It’s unclear whether this is a reference to data from that specific week or data from the previous December, resulting in a year-over-year decrease. It’s like evaluating a financial product with a 7-day annualized return of 5% and low risk. But when you examine the month’s profit trend, you realize that there has been an exceptionally high increase in returns over the past 7 days!

Isn’t this data something that e-commerce platforms can manipulate by offering or not offering coupons and promotions?

Not to mention, during this critical period, a slew of Android smartphones was released, while the iPhone 15 had been on the market for several months! The shopping frenzy of Singles' Day has already passed, and most people who intended to buy have likely already made their purchases. In theory, iPhone sales should not plummet while Android sales skyrocket, right?

Even within this unreliable data, the claim of a 3% annual sales decline for iPhones doesn’t seem very credible. A decline in iPhone sales is inevitable when you consider the durability of iPhones and the frequency of upgrades. Who would rush to replace their phone constantly?

Apple’s annual report for the previous year has already been released, showing an overall decrease in revenue. The blue box represents domestic revenue, with 72,559 million for 2023 and 74,200 for 2022, a decrease of about 2%.

If we were to assume a 3% decline in iPhone sales, it could be due to an increase in iPhone Average Selling Price (ASP) or better performance from the iPad and Mac product lines. In a way, these factors would be beneficial for Apple!

The red box represents total global revenue, with a decrease of nearly 3%. What does this mean? Apple’s revenue in China is surprisingly better than the overall global market performance.

Here’s a more grounded piece of data.

This screenshot is from JD.com during last year’s Singles' Day. Among the top five products, three belong to the iPhone 15 series. Even the iPhone 13, released in 2021, managed to secure the fourth position.

Now, whether it’s Mac, iPad, or iPhone, the hardware products from Apple have an excessively long lifespan. In other words, the natural upgrade cycle for Apple’s existing users has lengthened, and overall, Apple’s hardware prices have not increased as dramatically as those of Android smartphones.

A report suggests that by the end of this year, the global iPhone user base will reach 1.3 billion, with an average lifespan of 8 years. What impact does this have?

So, a quick look at the financial reports reveals that Apple’s Services segment is thriving. In the fourth quarter, it generated $22.3 billion, accounting for a quarter of the quarterly revenue and a 16% year-over-year increase. With a total annual revenue of $85.2 billion, it also makes up nearly a quarter of the annual revenue, with a 9% year-over-year increase.

In other words, Apple TV+, Apple Music, Apple Arcade, Apple Fitness+, Apple News+, Apple Podcasts, Apple Books, iCloud+, and other content services have now become significant contributors to Apple’s revenue, on par with iPad, Mac, wearables, and smart home products combined.

Speaking of profit margins, even Apple’s high hardware profit margins can’t match the profitability of Services.

And recently, Apple has introduced a new wave of Apple Silicon M-series chips, the new M3 series, with new products like iMac and MacBook Pro already on the market. In the future, a series of new products featuring the M3 series chip, including iPad, MacBook Air, Mac mini, Mac Studio, and Mac Pro, are expected to boost revenue for iPad and Mac significantly!

And perhaps the dark horse for substantial growth is Apple Vision Pro, available for pre-order on January 19th and set to launch in the US on February 2nd.

Whether you like it or not, taking a look at the real world is ultimately more beneficial to oneself.

Apple Treads a Familiar Path, Potentially Yielding Market Share to Independent Brands

Apple is following a path akin to what Japanese electronics and joint-venture automotive companies once did, ultimately ceding a significant portion of the market to independent brands.

Since the passing of Steve Jobs, the Apple led by Tim Cook has maintained an upward trajectory in terms of sales and profitability. However, the products themselves have seen minimal innovation. In pursuit of higher profits, even the charging adapters and headphones have been omitted from the package.

Therefore, the Apple under Cook’s leadership has been coasting on inertia, and this momentum will gradually wane. This is especially true in the current era in China, where several brands are rising, and Apple is likely to be affected as the competition intensifies.

With no fast charging, ordinary signal quality, poor heat dissipation, the persistent notch design, and unyielding pricing, each successive product iteration offers little to boast about apart from the A-series chips. Except for its own ecosystem and software, there’s little else that sets it apart.

Lacking innovation, annual incremental updates, high prices, and a focus on profit have transformed what was once an innovative, youthful product into a conservative, money-making machine.

Apart from brand loyalty and those who are less discerning in the realm of smartphones, most individuals tend to steer clear of Apple. This is because Apple’s smartphones have largely detached from the concept of value for money.

Therefore, weakness is not the hindrance to human progress; arrogance is.

Finally, why are there so many endorsements for a particular brand in these responses? Xiaomi and OPPO produce twice as many as the brand you mentioned.

Explanation: Everyone is 30% poorer.

Insights for Older Apple Fans

Let me share some thoughts with you, especially for older Apple fans.

Firstly, true Apple users like me who have the entire Apple ecosystem, including Mac, iPad, and iPhone, are immune to Android’s appeal. We are not going to be swayed by Huawei or other competitors.

Secondly, the users who may switch to other brands are those who are price-sensitive and typically opt for the standard versions, not the Pro Max. This group is often dominated by female users who are not interested in diving into the world of tech geeks. If there is competition, devices like the Mate 60 might attract these users.

Thirdly, apart from incremental innovations, iPhone users rely heavily on core software functionality and use their devices for everyday tasks rather than intense gaming. They prioritize user-friendly interfaces and smooth performance over cutting-edge specs. However, this time, the improvements are minimal, so even when it’s time for an upgrade (like the iPhone 13 Pro), I’m considering waiting until next year.

I couldn’t find the exact data source, but it seems that the market drop might not be as significant as speculated. Previous data suggested a drop of around twenty points. Nevertheless, the overall trend and conclusions remain consistent, so let’s assume the accuracy of the data for now.

Details like the 60Hz refresh rate aren’t the primary reasons behind the decline in sales. If these factors were the cause, the standard versions of iPhones would have consistently low sales, rather than a sudden drop this year. Comparing hardware specifications with OVM flagship and mid-range phones doesn’t hold up.

The main contributing factors are the return of users due to product pricing and competition.

I mentioned the pricing of the OPPO Find X7 Ultra yesterday. The starting price is reasonable, but the 512GB version is priced too high. OPPO doesn’t offer a 12+512GB option, only 16+512GB, which leaves potential buyers unsatisfied.

On the iPhone side, there’s a similar issue, not related to RAM but known as the Golden Storage Price strategy. This pricing method works well when there’s no strong competition or when competitors follow the same approach.

In European markets, due to carrier policies, tariffs, and other factors, Samsung and Huawei have set their prices quite high. Huawei has also pulled back significantly, and other competitors are not strong enough. Apple’s strategy works here.

In China, this strategy worked well in the past couple of years. Samsung in China and Huawei in Europe have been struggling. OVM has some competition but isn’t strong enough, and Huawei’s 4G Snapdragon devices are struggling.

To consider the opinions of various groups, here’s a summary of the high-end market share in the first half of 2023:

Apple > Combined competitors x2

Struggling Huawei ≈ OVM and Xiaomi’s combined share

This was the market landscape in the first half of 2023, and it was similar in 2022 and 2021.

However, in the second half of 2023, two important factors came into play:

  • Storage price reduction
  • Huawei’s comeback

Due to these factors, the price of the Mate60 Pro with 12+512GB storage is 6999 RMB, Huawei’s flagship SKU, which is 800 RMB cheaper than the previous generation.

The cheapest iPhone15 in the series starts at 5999 RMB, but upon closer inspection, it comes with 128GB storage. The 256GB version is priced at 6999 RMB, and the 512GB version is priced at 8999 RMB.

In today’s world of increasing app data, photos, and videos, flagship devices primarily promote 512GB storage, followed by 256GB and 1TB. Some KOLs might focus on the initial price, but actual consumers will notice:

Ah? 9000 and 7000?

Or they might be torn between products at the same price:

Ah? The standard 256GB and the Pro 512GB?

Typically, when competitors return to the market, this alone would be enough to cause a drop in iPhone market share. Adding to this, Huawei has brought its own Kirin chipsets back, so if there isn’t a significant drop, it would be surprising.

The sales of the iPhone15 standard version last year were average, partly because the Mate60 Pro had over 4 million activations, accounting for over 25% of all iPhone sales data in the fourth quarter of 2023.

Keep in mind that this data was collected during a severe shortage when the entire Mate60 series primarily supplied 512GB and 1TB Pro models.

In conclusion:

If Apple’s pricing strategy remains unchanged, and with the gradual increase in Kirin production capacity, we may witness a repeat of the 2020 situation where Huawei and iPhone had a fifty-fifty market split in the first half of the year.

The ban on iPhones has been widely reported on the internet.

A significant portion of people have been prohibited from using iPhones and other Apple products. Ironically, these individuals were previously Apple’s primary users. The growth in sales of other smartphones in the fourth quarter can also be attributed to this, as many people were required to replace their iPhones in the fourth quarter, even if they originally had no plans to do so.

The decline in Apple’s sales in China is not just a problem for this year, but it will continue in the future. No matter what Apple does, there won’t be any improvement.

Apple’s Market Share Challenge

Apple’s market share needs to be viewed in a global context. While the iPhone remains the same iPhone, it has become less cost-effective compared to its peers, both in the Chinese and global markets. Globally, Apple can maintain its current market share, but to completely hold onto it, it must sacrifice some profits.

  1. In the Chinese market, the launch of the Huawei Mate 60 series changed the previous situation where iPhone’s market share was artificially inflated due to reduced competition caused by U.S. sanctions. The specifications of the standard version of the MOV Honor have been upgraded to a level similar to the Pro version in previous years, with a starting memory configuration increased from 8+128 GB to 12+256 GB. Compared to last year’s Pro version, it’s effectively a price reduction of 1500 yuan.

  2. In the overseas market, after the release of the Samsung Galaxy S22 series, entry-level memory versions of Samsung Galaxy S22+ and above, as well as flagship models from other brands, have all iterated to 256GB or more. Following the release of the Samsung Galaxy S23 series, Qualcomm Snapdragon not only bid farewell to the Snapdragon performance, but also saw a significant improvement. Meanwhile, the standard iPhone model is playing tricks with chip downgrades, maximizing profit margins.

However, there is only a downward space of up to 20 million units for iPhones in the Chinese market, causing Apple’s high-end market share to drop to below 65%. In other regions globally, Apple’s market remains stable, and upgrading the entry-level versions to 256GB could help recover market share for iPhone Plus and above.