Apple’s Struggles in China: iPhone Shipments Decline and Market Share Slips
Apple’s market share in China is on a downward spiral as iPhone shipments are expected to drop in the first half of 2025, according to analyst Ming-Chi Kuo. Despite hopes for a boost from the new iPhone SE 4, Kuo predicts a 6% year-over-year decline in iPhone shipments, contributing to a 2.4% drop in Apple’s stock price on Friday.
Apple, once the dominant force in the Chinese smartphone market, now faces growing competition, shifting market dynamics, and internal design challenges that could impact its future prospects in the region.
The iPhone Shipment Dip: What’s Going Wrong?
1. Expected Decline in iPhone Shipments
In his recent report, Ming-Chi Kuo, an analyst renowned for his insight into Apple’s supply chain, warned of declining iPhone shipments in China. Kuo expects Apple to ship 6% fewer iPhones during the first half of 2025 compared to the same period in 2024.
This forecasted decline is in contrast to Apple’s usual pattern of steady growth, especially given the anticipated launch of the iPhone SE 4, a budget-friendly version of its flagship device. Despite the new release, Apple is struggling to maintain its foothold in China, one of the world’s most crucial smartphone markets.
2. The Impact of eSIM Technology
One of the key reasons behind Apple’s struggles is the design of its upcoming iPhones. According to Kuo, Apple’s plans for the 2025 iPhones include two models that are so thin they will likely only support eSIM (embedded SIM) technology, which is not widely adopted in China.
China is still heavily reliant on physical SIM cards, meaning that these new eSIM-only models could face significant shipping momentum challenges unless Apple modifies their design to accommodate the market’s preferences.
Apple’s refusal to fully adapt its designs to the unique needs of the Chinese market may prove costly, especially as local competitors continue to rise in popularity.
What’s Happening in the Chinese Market?
3. iPhone Shipments Drop in December 2024
Kuo’s report highlights troubling trends in Apple’s recent performance in China. In December 2024, while overall smartphone shipments in China remained flat, iPhone shipments dropped by 10-12% compared to the previous year. This represents a sharp contrast to the growth Apple experienced in previous years and signals that demand for the iPhone in China is waning.
Local smartphone brands like Xiaomi, Huawei, and Oppo have been steadily gaining ground in China, offering consumers more affordable alternatives with increasingly sophisticated technology. With Chinese consumers becoming more price-conscious, Apple’s high-end pricing strategy may no longer hold the same appeal.
4. Apple’s AI Push Falls Flat
Another factor that may be contributing to Apple’s struggles in China is its focus on on-device AI capabilities. Kuo noted that Apple Intelligence, the company’s own on-device artificial intelligence offering, has not managed to spur the hardware upgrades or service revenues Apple expected.
Despite Apple’s push for integrating AI features into its devices, demand for iPhone replacements has not seen a significant uptick due to these advancements. In fact, Kuo points out that cloud-based AI services have made more rapid strides in recent months, leading to declining interest in Apple’s local AI offerings.
The Numbers: Apple’s Shipment and Revenue Forecasts
5. iPhone Shipments for 2024 and 2025
Kuo’s forecast for iPhone shipments for 2024 and 2025 suggests a less-than-optimistic outlook for Apple. For 2024, Kuo estimates Apple will ship around 220 million iPhones, which is significantly lower than market consensus projections of 240 million or more.
Looking ahead to 2025, Kuo anticipates Apple’s shipments will remain at around 220 million to 225 million units. Given that these numbers fall below the expected market consensus, Apple’s potential revenue from iPhone sales could also be affected.
Why Is This Happening?
6. Increased Competition from Local Brands
The primary challenge Apple faces in China comes from its local competitors. Brands like Huawei, Xiaomi, and Oppo continue to gain market share with devices that offer similar features to the iPhone but at a significantly lower price point. Many of these Chinese manufacturers have also adopted advanced 5G technology, better camera systems, and high-performance AI capabilities, which appeal to Chinese consumers.
Apple’s premium pricing strategy may now be a hindrance rather than a strength, especially in a market that is shifting toward value-based purchasing. Local Chinese brands also enjoy better customer relationships and a deeper understanding of the market’s unique needs, giving them a distinct advantage over foreign competitors like Apple.
7. Limited Customization for the Chinese Market
Another issue Apple faces is its lack of localization in terms of product features and design. As mentioned earlier, the adoption of eSIM technology, which is not yet popular in China, could be a dealbreaker for many potential iPhone buyers. By focusing on global trends instead of catering to local preferences, Apple risks alienating one of its largest markets.
What Does This Mean for Apple?
8. Potential Consequences for Apple’s Stock
Apple’s stock took a 2.4% hit following the release of Kuo’s report, and investors are likely keeping a close eye on the company’s future growth prospects in China. If Apple’s market share continues to slide in China, it could impact not only iPhone sales but also its overall revenue. Given that China is a key revenue generator for Apple, any sustained decline in sales there could lead to further stock fluctuations in the future.
Conclusion: Apple’s Road Ahead in China
In summary, Apple’s market share in China is facing significant pressure, with iPhone shipments expected to decline 6% year-over-year in the first half of 2025. Local competition, design limitations, and lackluster AI adoption are all factors that are contributing to Apple’s struggles. As China remains a crucial market for the company, how Apple responds to these challenges will play a significant role in determining its future success in the region.
For now, Apple needs to adapt to local market trends, refine its designs, and invest in customer-centric features to avoid falling further behind in one of the world’s most competitive smartphone markets.
I am Aparna Sahu
Investment Specialist and Financial Writer
With 2 years of experience in the financial sector, Aparna brings a wealth of knowledge and insight to Investor Welcome. As an accomplished author and investment specialist, Aparna has a passion for demystifying complex financial concepts and empowering investors with actionable strategies. She has been featured in relevant publications, if any, and is dedicated to providing clear, evidence-based analysis that helps clients make informed investment decisions. Aparna holds a relevant degree or certification and is committed to staying ahead of market trends to deliver the most up-to-date advice.