Apple loses top position in China due to decline in smartphone sales

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Two research reports published this week showed: Apple †AAPL† drops to third place, behind Chinese Android handset brands.

Smartphone sales in China fell 14% in the first quarter as volumes fell “close to levels seen during the severe pandemic-hit Q1 2020,” Counterpoint Research said in a statement. report on Thursday.

Apple †AAPL†The company’s sales fell 23% in the three months to March, compared to the previous quarter, Counterpoint Research added. The company experienced rapid growth in China last year, right after the release of the iPhone 13.

Its market share in China now stands at 17.9%, compared to 21.7% in the quarter ended December.

A report from Canalys on Friday also found that Apple fell from the market leader in China to third place, with shipments falling 36% in the first quarter from the previous quarter. Canalys tracks shipments from manufacturers to stores, rather than sales to consumers.

The Chinese economy had a good first quarter. Lockdowns leave it 'in distress'

Ivan Lam, senior analyst at Counterpoint Research, attributed Apple’s decline in part to the economic slowdown in China that has “tarnished money in people’s pockets”.

Homegrown Chinese brands — including Vivo, Honor and Oppo̦ — outperformed Apple as their sales recovered after suffering from the strong performance of the iPhone 13 in the last quarter of 2021, Lam added.

All in all, a seasonal slump in demand and major economic uncertainty weighed on the market in the early months of this year.

“I don’t think the second quarter data will improve much as ongoing lockdowns will continue to affect consumers’ willingness to spend,” Lam told CNN Business.

According to CNN calculations, there are currently complete or partial lockdowns in at least 27 cities across China, affecting up to 165 million people. Shanghai, the country’s largest financial center and a major manufacturing center, has been on lockdown for more than a month. The restrictions have forced many businesses to close and dealt a huge blow to economic activity.

The Chinese economy has slowed sharply in recent months. Retail sales contracted in March for the first time in more than a year. Unemployment, meanwhile, rose to a record 6% in 31 major cities.

“These factors, combined with the downward trend in demand already apparent in the Chinese smartphone market before the new wave of the pandemic, had a significant impact on the industry,” Mengmeng Zhang, a research analyst for Counterpoint Research, said in the report accompanying the data release. .

She expected smartphone demand in China to remain “underwhelming” due to weak consumer confidence and the lack of new innovations to stimulate consumers.

Apple warns of severe headwinds in China
It’s not just weak demand that hurts Apple in China. Company is also facing supply chain challenges due to the lockdowns in China. Foxconn, a major supplier to Apple, shut down production at its factory in Shenzhen for a few days last month as the city imposed a Covid lockdown. Pegatron, an iPhone assembler, also suspended operations at its factories in Shanghai and Kunshan earlier this month.

CEO Tim Cook said on Thursday during an earnings call that increasing Covid restrictions in China, along with sector-wide silicon shortages, would impact the company’s next quarter by $4 billion to $8 billion.

“Supply chain issues continue to be a headwind in China and will weigh on growth in the June quarter,” said Dan Ives, analyst at Wedbush Securities.

Earlier this month, Canalys warned that the world’s smartphone vendors are facing significant uncertainty due to escalating lockdowns in China, the war between Russia and Ukraine and the threat of inflation.

— Samantha Murphy Kelly contributed to this report.

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