Last year, it was still ranked first, but this year it has fallen out of the top five. Apple is rapidly losing its dominance in the Chinese market.

[Both quantity and price are affected]

In 2023, Apple became the sales champion of China's smartphone market for the first time with a market share of 17.3%. It was thought to be the beginning of Apple's renewed glory, but it turned out to be the last glimmer of hope.

According to previous data from Counterpoint Research, iPhone sales in China fell by nearly 20% in the first quarter of 2024, dropping out of the top five in the domestic mobile phone market. OPPO, Honor, Huawei, vivo, and Xiaomi, among other Chinese brands, ranked ahead. In the second quarter, while shipments in China's smartphone market increased by 8.9% year-on-year, iPhone sales in China continued to decline, while vivo, Huawei, OPPO, Honor, and Xiaomi continued to dominate the top five.

On April 28, 2011, the white version of the iPhone 4 was launched in China, with thousands of people queuing up at the Apple Store in Beijing's Xidan shopping district. Some consumers even arrived a day early.

"It was hard to get even at a higher price, but now no one wants it even at a discount."

The iPhone 15 broke even just one week after its launch and has seen price drops exceeding $1,000 six months after its launch. In March this year, it continued to drop by $150, and in May, it dropped by another $200 ahead of the 618 shopping festival. During the latter stages of the 618 promotion, it saw a further price cut of $235.

Since its inception, the iPhone has always been presented as "high-end and elegant," but today's Apple seems to have lost the aristocratic charm it once had.

According to financial reports, Apple's revenue in the first quarter of this year was $90.753 billion, a year-on-year decrease of 4%. Revenue in Greater China was $16.372 billion, down 8% year-on-year, twice the global average decline. In the second quarter, Apple's revenue was $85.777 billion, representing a 4.87% increase from the same period last year. However, revenue in Greater China still declined by 6.5%. Greater China is the largest market for the iPhone globally and the only geographical region where Apple's revenue declined year-on-year.

Autumn's harvest comes from spring's sowing, while winter's pain often pays for summer's mistakes. The predicament Apple is facing today was sown years ago.

[From Excellence to Mediocrity]

On January 16, 2008, Steve Jobs slowly pulled the MacBook Air out of an envelope, sending the world into a frenzy. This remains a highlight in Apple's history.

In consumers' perceptions, Apple is synonymous with disruption and innovation, but this world-shaking feat came to an abrupt halt with Jobs' death. If Jobs was a genius inventor who took unconventional paths, Tim Cook is a seasoned and prudent manager who excels at generating steady cash flows for Wall Street.

When the iPhone 13 was launched, Apple fans joked that the biggest difference between the iPhone 13 and iPhone 12 was their names. Even Apple loyalist Duan Yongping couldn't resist joining in the criticism. The mediocrity of the iPhone 14 was so apparent that even Apple insiders couldn't help but criticize it, with Jobs' daughter publicly expressing her lack of interest in upgrading. When the iPhone 15 was launched, Apple's market value plummeted by $340 billion overnight.

The lack of innovation and freshness has been Apple's biggest criticism for years. This is not just due to the talents and dispositions of the two generations of leaders but also to the inherent objective laws of industrial development.

Three years ago, Ren Zhengfei published an article titled "Stars Don't Ask Those Who Rush Ahead" on Huawei's internal community. It included the following passage:

"Technological development is at the flat top of a saturation curve, where immense effort does not necessarily yield commensurate returns. Huawei invests $20 billion annually in R&D, but only realizes 40% of its investment as revenue. Sixty percent of the candle burns out in the dark exploration.

An undeniable fact is that as smartphones continue to advance in the historical process, the entire industry has entered a stage of tail-end innovation in technology. Even with significant effort, it is difficult to achieve breakthrough gains.

As a result, pioneers like Apple gradually slow down, while pursuers represented by domestic brands gain the best strategic window to narrow the gap.

Since 2016, domestic mobile phone manufacturers have embarked on independent innovation in a series of components such as screens and cameras. The most typical and successful innovations have been full-screen and foldable displays. By 2020, domestic mobile phone brands had begun to deploy large-scale self-developed solutions for underlying software and core components while initiating exploration of technologies such as artificial intelligence.

In just a few years, Chinese brands have made significant strides in imaging, systems, performance, and design. Taking vivo as an example, it has insisted on self-developing imaging chips and has evolved to the third generation (V3+ blueprint imaging chip). With this chip, the vivo X100 Ultra has broken many technical limitations in the video field, effectively solving issues with clarity, color, focusing, and audio recording. According to official information, the X100 Ultra has surpassed the iPhone 15 Pro/Max in video exposure, stabilization, and clarity.

After the launch of the vivo X100 series in November last year, pre-orders reached 7.4 times that of the previous generation, and sales on the first day exceeded 1 billion yuan, breaking all previous first-day sales records for vivo series products.

As Apple regresses and domestic mobile phones progress, the gap between them continues to narrow. When this gap reaches a certain point, a market reversal is inevitable, especially when Chinese consumers suddenly begin to pursue extreme cost-effectiveness, accelerating this reversal.

Looking back, Apple's decline has been evident for years.

In 2017, Apple raised the prices of the iPhone 8 and iPhone X, leading to a significant boost in company performance. Encouraged by this success, Cook chose to raise the prices of the new iPhones in 2018, but consumers did not respond favorably, and iPhone sales declined for four consecutive quarters.

To regain market share, the iPhone 11 in 2019 was launched at a discounted price, with immediate results. In the fourth quarter of 2019, iPhone sales increased by 7.8% year-on-year, ending a year-long decline.

In fact, since then, Apple has realized that it has lost its ability to command a premium and has since maintained growth through price cuts. For example, while the starting price of the iPhone 13 is the same as that of the iPhone 12, its storage capacity has doubled, starting at 128GB. The iPhone 13 Pro and iPhone 13 Pro Max even offer up to 1TB of storage, effectively offering more for the same price, akin to an indirect price cut.

The difference is that while previous price cuts by Apple elicited a positive response from consumers, even discounted prices struggle to revive the market today.

Capital markets are highly sensitive to corporate fortunes. According to Berkshire Hathaway's latest report, Buffett significantly reduced his stake in Apple from 789 million shares in the first quarter to approximately 400 million shares in the second quarter, a reduction of nearly 50%. Based on Apple's current share price of around $200, Buffett sold over $85 billion worth of Apple shares in a single quarter, demonstrating an unprecedented level of resolve.

In 2010, when Apple's market capitalization surpassed Microsoft's for the first time, The New York Times commented, "This is the beginning of a new era and the end of an old one."

Times have changed, and in China's mobile phone market at least, Apple is becoming a victim of the times.

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This article involves content related to listed companies and is based on the author's personal analysis and judgment of information disclosed by listed companies in accordance with their legal obligations (including but not limited to temporary announcements, periodic reports, and official interaction platforms). The information or opinions contained herein do not constitute any investment or other business advice, and Market Value Watch shall not be held responsible for any actions taken as a result of this article.

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