Apple's Chinese business is in danger even after being the best seller of phones in 2023

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Key notes

  • Apple’s iPhone sales in China are dropping as domestic brands like Huawei gain momentum.
  • Chinese chipmakers plan advanced chip production, potentially giving local phones a performance edge.
  • Apple’s CEO visited China twice in 2023, highlighting the company’s concern about the growing competition.
Tim Cook Margrethe Apple

A new development could challenge Apple’s dominance in the Chinese smartphone market: Chinese chipmakers, including state-backed SMIC, are planning to create chip production lines in Shanghai that supply state-of-the-art processors to domestic smartphone makers like Huawei. This move could give domestic brands a significant edge, posing a major threat to Apple’s iPhone sales in China.

Let’s have a look at Apple’s recent performance in China:

  • While Apple enjoyed a 2% revenue increase globally in the final quarter of 2023, it faced a 13% slump in China despite the release of the iPhone 15.
  • This decline reflects a weakened consumer appetite due to the pandemic and a growing interest in homegrown gadgets, exemplified by Huawei’s Mate 60 Pro featuring a domestically-made 7-nanometer chip.
  • Although Apple secured the top smartphone seller position in China for 2023, it did experience a sales decline compared to Huawei’s 36% increase in the final quarter.
  • Due to all this, Apple had to offer unusually high discounts in China for the Lunar New Year.

What could be the upcoming challenges?

  • Chinese chipmakers plan to produce 5-nanometer chips, even more advanced than the ones used by Huawei. This advancement could significantly improve the performance of domestically made smartphones.
  • This development poses a serious threat to Apple, as locally-produced chips could give Chinese brands a competitive edge in price and performance.

Apple’s response:

In response to the increasing danger, Tim Cook, the CEO of Apple, paid two visits to China in 2023. Amongst declining sales, he even made a surprise appearance in October. To maintain its standing in the Chinese market, Apple may need to consider additional measures, such as investing in local production or providing more competitive pricing.

It is important to note that this news is still developing, and the long-term impact on Apple’s position in the Chinese market remains unclear. 

More here.

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