Apple lost its crown as China's biggest smartphone seller in the first quarter of 2024 as its smartphone shipments fell 6.6% from a year ago amid intense competition, preliminary data from research firm IDC showed on Thursday.
Honor and Huawei were tied for the top spot, with Honor's
market share rising to 17.1% and Huawei's share climbing to 17%, IDC said,
while the iPhone maker's market share fell to 15.6%.
The IDC declares a statistical tie when the difference
between the share of revenue or shipments between two or more vendors is 0.1%
or less.
"Apple's price promotions in the quarter were unable to
mitigate the impact of the intense competition from Android players,"
Arthur Guo, senior research analyst at IDC China said in the report.
Overall smartphone shipments in China rose 6.5% to 69.3
million units, according to IDC.
Earlier this week, data from research firm Counterpoint
showed Apple's smartphone shipments in China tumbled 19% in the first quarter
of the year, the worst performance since 2020.
Apple CEO Tim Cook toured Southeast Asia last week, visiting
Vietnam, Indonesia, and Singapore, as part of a multiday trip geared toward
reducing Apple’s reliance on China as its central manufacturing hub.
And while Apple isn’t looking to abandon China — Cook spent
a number of days in the country just last month — the company is hedging
against the potential for future manufacturing roadblocks in the region.
At the same time, the company is slowly setting its sights
on India as its next major growth opportunity now that China has become a more
mature smartphone market.
“Apple is in the beginning stages of a decade[-long]
transition away from reliance on China and diversify that to other countries in
Southeast Asia on both the manufacturing front and the demand front,” Deepwater
Asset Management managing partner Gene Munster told Yahoo Finance.
But reducing Apple’s dependence on China for building its
devices and growing its market share could take some time.
Manufacturing growth beyond China
China accounts for a disproportionate amount of Apple’s
supply chain partners such as Foxconn and Pegatron. That concentration of
manufacturing capacity in one area proved especially damaging during the
pandemic when China forced factories to shut down, limiting Apple’s ability to
build and ship devices.
Once capacity came back online, Apple was able to meet
consumer demand again. But the fact that a factory closure had such an impact
on the company was a troubling sign of fragility in its supply chain.
“Apple basically said they fulfilled about $5 billion of
back revenue on the last conference call,” BofA Securities analyst Wamsi Mohan
told Yahoo Finance. “That’s $5 billion for one facility shut down in China.”
Left unchecked, that lack of supply chain resiliency could
come back to bite Apple again given the gloomy state of the US and China’s
relationship and tit-for-tat maneuvers the countries are making with regard to
their respective tech companies. The US has tried to box out Huawei from
getting access to high-end processors and is working to get ByteDance to sell
TikTok, while China is reportedly requiring state employees to ditch devices
made by Western companies.
“We see Cupertino going aggressively after [Southeast Asian]
countries on the supply front,” Wedbush analyst Dan Ives told Yahoo Finance.
“Cook is hedging his bets as China remains a very dicey situation for Apple
while Vietnam and Indonesia are soft landing spots for iPhone production.”
Apple’s problems in China extend beyond manufacturing
complexities. The company is also contending with a slowdown in iPhone sales in
the region as economic growth flags and regional rivals grab market share.
Greater China is Apple’s third-largest market by revenue
behind the Americas and Europe. But iPhone sales in the region are slowing. In
Q1, Apple reported revenue in Greater China fell 13% year over year, and that’s
after falling 2% for all of 2023. Apple previously reported 9% growth in the
region in 2022.
China is also a relatively mature smartphone market, making
massive growth gains a difficult proposition, which is where India comes in.
India as the next China
The most populous country in the world, India has a growing
middle class that could prove to be a boon for Apple.
“China took probably five years before it really mattered,”
Munster explained. “India probably takes 10 years, and the reason is they’ve
got the population on their side, but the GDP per capita is about a quarter in
India what it is in China. And so just in general, people don’t have … the same
wealth in India as they do in China.”
Apple opened its first official store in India last year,
with Cook himself kicking off the festivities for the Mumbai location. Apple
also builds some of its latest iPhones in the country, making it even more
important for the company.
Emerging markets like India are going to be key to Apple’s
growth in the coming years, as its larger markets continue to mature and growth
declines. The company has been telegraphing that much as well. In earnings
calls, executives repeatedly point to emerging markets as growth areas during
earnings calls, with Tim Cook specifically pointing to the likes of India and
other growth markets in his opening remarks during Apple’s Q1 call.
Still, Apple’s push to expand its manufacturing and market
share outside of China will take years. So, for the foreseeable future, the
company will have to continue to rely on China and figure out how to make the
best of it.
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