Has Huawei’s Penetration Downed Apple in China?

Apple’s disappointing forecasts for the fourth quarter of 2023, commonly known as the holiday season, highlight its growing problems in China, where the iPhone maker has been hit by the unexpected rise of Huawei and an increasingly unfriendly business environment in the country. In this world.

US giant Apple, trying to reverse several consecutive quarters of revenue declines, reported its lowest revenue from the Greater China region since mid-2022. Shares of the California-based giant fell more than 3% after earnings. The number exceeded the average expectations of five analysts.

CEO Tim Cook confirmed to Wall Street that demand for the iPhone in China remains strong, blaming weakness for Mac and iPad devices. But he expects flat revenue for the company’s fiscal first quarter and December, suggesting a rebound in growth that Wall Street counts on.

Investors are worried about the iPhone’s prospects in China, Apple’s most important international market and until now its main manufacturing base.

China’s consumer economy is faltering, while US companies are facing increased pressure from Beijing as the technology conflict with the United States intensifies. Huawei’s surprise appearance in August with a Chinese-made smartphone equipped with an advanced 5G processor also took advantage of the patriotic sentiment that has driven US iPhone sales.

“The challenges facing Apple in China are unprecedented,” IDC analyst Will Wong said after the results. “It has to deal with political tensions and competition from Huawei, but also different consumer sentiments that are more rational and cautious in spending.”

Apple’s revenue in Greater China fell 2%, a bigger decline than the company-wide figure. There are signs that this trend may continue: initial sales of the iPhone 15 in China were 6% lower than before, which is partly due to Huawei’s inroads, according to consultancy GfK.

In addition to strong competition, Apple faces increased risks from political tensions between Washington and Beijing.

Beijing expanded the ban on Apple products to include state-backed companies and government-sponsored companies. Han Hai Precision Industry Co., which assembles the majority of iPhones from its Chinese factories, is now under investigation over taxes and land use.

Important market

Shares in Foxconn Group’s listed unit Hon Hai and fellow iPhone assembler Pegatron fell in Taipei on Friday.

Still, Cook said the iPhone continues to make headway in the world’s largest smartphone market. He said the different models represent the four best-selling phones in urban China.

“China is a very important market,” the CEO said during a conference call with analysts after the results were announced. “I’m very optimistic about that.” He did not face direct questions about the situation.

The iPhone 15 went on sale on September 22 – a week before the end of the quarter – so the latest results provide only an initial idea of ​​the device’s performance. Investors will get a clearer picture early next year when Apple reports sales results during the Chinese holiday season.

Cook said that if the smartphone market in China in general is shrinking — as analysts say — Apple’s results indicate it is gaining market share. He pointed out that the company will open a new store in the second-largest economy this week in Wenzhou, in the eastern province of Zhejiang, which will be the company’s 46th store in China.

Cook was in China last month and said he “couldn’t be more excited” about the interactions he had with customers and employees, reiterating Apple’s commitment to manufacturing in the country. Beijing announced an investigation into Foxconn a week later.