Apple Takes a Beating in China as the CCP Manipulates Its Domestic Smartphone Market

Customers at an Apple flagship store after the launch of the iPhone 15, in Beijing, China, on Sept. 22, 2023. Kevin Frayer/Getty Images

As Apple’s iPhone sales in China slid 24 percent over the first six weeks of 2024, the tech giant’s stock price plummeted. In the global aftermath, Apple lost its long-time position as the most valuable company in the world.

Analysts say Apple’s status in China—which has long played a huge role in Apple’s profits, accounting for almost 20 percent of its sales over the past decade—has been undermined by Beijing’s intervention in the smartphone market, combined with the weakened Chinese economy.

Apple has suffered unprecedented competitive pressure from domestic Chinese brands, especially Huawei. The rout in the Chinese market is expected to impact Apple’s overall shipments this year.

Hammered by the setback in iPhone sales in China, coupled with recent EU antitrust fines of EU$1.8 billion (about $2 billion), Apple’s stock price fell for seven consecutive trading days starting Feb. 27, wiping out over $200 billion of Apple’s market capitalization.

As of March 10, Apple’s shares were down 9 percent cumulatively for 2024. Goldman Sachs Group removed Apple from its list of top buys this month over concerns about the prolonged iPhone sales slump.

A report from International Data Corporation listed Apple as the top smartphone brand in China last year at 17.3 percent market share, with Chinese brand Honor coming in a close second at 17.1 percent. However, the latest data by Hong Kong-based Counterpoint Research, a market research firm, showed that China’s overall smartphone market shrank significantly in the first six weeks of 2024, with overall sales down 7 percent year-on-year.

According to the Counterpoint report, in those six weeks, iPhone sales in China fell to fourth place, down 24 percent year-on-year as its share of the Chinese smartphone market dropped to 15.7 percent. Outranking Apple were three domestic Chinese smartphone brands, with Huawei rising to second place. As Apple’s Chinese market share shrank, Huawei’s market share grew to 16.5 percent from 9.4 percent a year earlier, with its sales jumping 64 percent.

Apple’s Love Affair With China Fades 

In the first quarter of 2023, sales of iPhones led the pace in the global smartphone market, as Apple scored 50 percent of global smartphone revenues and over 80 percent of the sector’s profits. In June, Apple’s market capitalization exceeded $3 trillion, making it the world’s most valuable company.

On June 12, Apple World Today reported optimistically that in the first quarter of 2023, Apple had recorded the biggest share in the China smartphone market, “increasing sales by 6 percent year over year in a declining market.”

However, as the summer waned, so did the rosy picture for Apple.

On Aug. 29, 2023, Huawei, which has been hit hard by U.S. tech sanctions, quietly launched its high-end Mate 60 series. The release coincided with U.S. Commerce Secretary Gina Raimondo’s visit to Beijing. Fake ad campaigns featuring the commerce secretary went viral on Chinese social media, while netizens mocked Ms. Raimondo’s tough-on-China stance and touted the phone as a breakthrough for Chinese tech independence.

The lack of a formal launch event only added to the buzz around the new phone, which was hyped as a “satellite phone,” in a bid to attract Apple users. Within the first six weeks after the Aug. 29 launch, the company sold 1.6 million units of its Mate 60 Pro smartphone.

Shortly after the Mate 60 release, Apple debuted its new iPhone 15 series. Despite initial market enthusiasm, public response to the Sept. 13 launch was lukewarm. According to a Counterpoint report, Apple’s market share in China slid almost 10 percent year on year in the year’s third quarter, coinciding with the new phone’s tepid reception.

Zhang Mengmeng, a senior analyst at Counterpoint Research, said that the iPhone faced stiff competition from Huawei at the top end of the market while being squeezed in the middle by aggressive pricing from Chinese domestic brands such as OPPO, Vivo, and Xiaomi, “Although the iPhone 15 is a great device, it has no significant upgrades from the previous version, so consumers feel fine holding on to the older-generation iPhones for now,” he said.

U.S.-based current affairs commentator Tang Jingyuan told the Chinese edition of The Epoch Times on March 7 that China’s economic downturn and high unemployment also impacted Apple’s sales. “With less money in pockets and less money to earn, people are inclined to opt for cheaper, locally produced cellphones,” he said.

Customers queue up outside a Huawei flagship store in Beijing on Sept. 25, 2023. Kevin Frayer/Getty Images

‘Breaking Through the US Supply Chain Blockade’

In stark contrast, Huawei’s flagship smartphone sales soared. Huawei’s return to the public eye during Ms. Raimondo’s visit to China was described by Chinese state media as “quietly breaking through the U.S. supply chain blockade.”

As a partner of the Chinese military, Huawei smartphones have long been honored as a patriotic choice. Now, Chinese official media and Chinese Communist Party (CCP) authorities endorsed the hype about its technical performance upgrades and took the endorsement a step further.

In December, a Bloomberg report, citing anonymous sources, noted that in September, one or two provinces had instructed employees to leave foreign-made devices at home. The trend accelerated towards the end of 2023, Bloomberg said, with state-owned enterprises and government departments in at least eight provinces instructing employees to use domestic brands. In December, smaller companies and agencies in at least eight less affluent provinces issued verbal orders to stick with Chinese-made brands, in what the report called a “dramatic quickening of Beijing’s campaign to wean itself off American technology.”

To support Huawei’s market share, the CCP also promoted sales of the company’s products within government institutions, Mr. Tang said.

“In the past, iPhone was one of the choices for state and private enterprises when it came to unit purchasing ... but now Huawei has become the only designated brand,” he reported.

Further, when Huawei introduced its Mate 60 series, China’s largest carriers—China Mobile, China Telecom, and China Unicom—were instructed to exclusively designate Huawei for promotion, Mr. Tang said. The three domestic operators were expected to collectively purchase millions of Huawei phones, Chinese tech media CNMO said in September.

“Under the influence of such strong administerial maneuvering, it is unsurprising that Apple’s sales in China have declined,” Mr. Tang said.

Decoupling Means Further Woes for Apple

In Mr. Tang’s view, the most critical factor in Apple’s significant sales decline in China is the leftward shift of the CCP, with more state-backed intervention, less market freedom, and a continued push to become independent of the West.

“The most profound reason is the CCP’s aggressive decoupling from the West,“ he said. ”Over the years, the CCP has gradually replaced U.S. products with Chinese hardware and software, from Microsoft software to Dell computers and Intel chips, and now it’s letting Huawei cell phones beat out Apple.”

“The CCP uses state resources to promote Huawei, a ploy that can quickly take down foreign companies,“ he added, noting that U.S. restrictions on Huawei products balanced the situation somewhat for Apple. ”If Huawei hadn’t been sanctioned by the U.S. for its technology, Apple would have suffered even more.”

The tech giant’s China woes will likely deepen as the CCP moves further left and continues decoupling from the rest of the world, Mr. Tang predicted.