Apple’s iPhone is losing market share in China as local competitors like Huawei gain ground. High prices and limited features appeal to a smaller, wealthier audience, while Chinese consumers prefer more affordable alternatives. Apple’s strategy is faltering, highlighting the need for fresh, useful innovations and new growth opportunities.
Here’s Why Apple’s iPhone Market Share in China Is Plunging
Author: Peter Cohan
No matter how great a company is, even the most successful product eventually matures and declines with the passage of time as rivals angle for a piece of the market your innovation created. A case in point is Apple’s iPhone, which the late, great CEO Steve Jobs launched about 18 years ago. While it’s one of the most successful and widely used products of my lifetime, the iPhone is in decline—especially in China, Apple’s second-largest market.
As Bloomberg reported earlier this week, the iPhone suffered an 18.2 percent drop in sales in China for the December-ending quarter, and a 5 percent drop in worldwide sales in 2024.
Why did Apple lose ground in China? Here is my five-whys analysis:
5 Whys
- Why did Apple suffer an 18.2 percent decline in holiday quarter iPhone sales in China? Chinese consumers prefer smartphones from rivals, noted Bloomberg. Huawei’s sales increased 15.5 percent in the quarter. “This is the first time since the U.S. ban that Huawei regained the leading position,” Counterpoint analyst Mengmeng Zhang told Bloomberg.
- Why do Chinese consumers prefer rival products? Apple charges too high a price for a product whose features Chinese rivals mostly match at a much lower price, according to a Babson College case study I co-authored titled Apple in China and India.
- Why does Apple charge more for the iPhone than do rivals? Unlike local rivals, Apple seeks to earn high margins by setting a high price to a wealthy fraction of the population seeking the prestige of owning an Apple. Moreover, the new iPhone 16—with the Apple Intelligence feature—failed to win over new Chinese customers, noted MarketWatch.
- Why did Chinese consumers not find the iPhone 16 compelling? Many reasons: These consumers are more price-sensitive, lacking partnerships, Apple does not offer Apple Intelligence in China, and consumers generally do not find Apple Intelligence useful, so they are not willing to pay more than Huawei charges to get AI on their iPhone, according to Investor’s Business Daily.
- Why do Chinese consumers prefer Huawei’s products? Huawei’s latest Mate 70 model gives Chinese consumers the option of using software “completely free of U.S. technology,” Zhang noted—a feature that helps Huawei’s push to win a larger share of China’s premium segment, reported MarketWatch.
3 Takeaways
In a nutshell, Apple’s iPhone strategy is fundamentally the same everywhere—set prices above rivals on the premise that customers are so locked in to their iPhones that they can’t afford to switch to lower-priced rivals. In countries like China, that strategy appeals to only a small percentage of the market. The majority of its smartphone buyers are happy to buy from a local manufacturer like Huawei that offers a much lower-priced product with features tailored to local needs.
Apple’s shriveling iPhone business offers three takeaways:
- A one-size fits all sales strategy rarely works—and if it does, it will not work for long.
- Leaders must introduce new product features to stay ahead of changing customer needs and the strategies of upstart rivals. And those features need to be useful.
- Leaders should invest in entirely new growth curves rather than milking old cash cows.
Credits: TCA, LLC.