A mere three months before that, Apple had regained its position as China’s top smartphone vendor for the first time in six years. Due to a sales decline that was more severe than the industry average, it has now retreated behind its Chinese rivals.
According to two recent studies, Apple has fallen to third place in the smartphone market share, trailing only Chinese Android handset manufacturers.
The economic slowdown in China and COVID restrictions on consumer spending have caused a dramatic shift in market rankings.
Smartphone sales in China fell by 14% in the first three months of the year as volumes “closed to the levels seen during the severe pandemic-impacted Q1 2020,” Counterpoint Research reported on Thursday.
According to Counterpoint Research, Apple’s sales fell 23% in the three months ending in March compared to the same period last year. When the iPhone 13 was released, the company saw rapid growth in China.
As of the end of December, it had a market share of 21.7 percent in China, down from 17.9 percent in the previous quarter.
According to a Canalys report released on Friday, Apple’s first-quarter shipments decreased by 36% compared to the previous quarter, dropping it from first to third place in China’s market. As a result, Canalys does not track sales to consumers, but rather manufacturer shipments to retail outlets.
A senior analyst at Counterpoint Research, Ivan Lam, believes that China’s economic slowdown has “affected money in people’s pockets” and thus contributed to Apple’s decline.
According to Lam, Chinese homegrown brands such as Vivo, Honor, and Oppo fared better than Apple in the fourth quarter of 2021, when sales recovered after being hurt by the strong performance of the iPhone 13.
In the first few months of this year, the market has been affected by a seasonal decline in demand and major economic uncertainty.
In an interview with CNN Business, Lam stated that “consumers’ willingness to spend” would be affected by ongoing lockdowns in the second quarter.
There are currently full or partial lockdowns in at least 27 Chinese cities, affecting an estimated 165 million people, CNN reports. Shanghai, the country’s most important financial and manufacturing center, has been shut down for more than a month now due to unrest. Businesses have been forced to close and the economy has suffered greatly as a result of the restrictions.
In the last few months, China’s economy has slowed dramatically. For the first time in over a year, retail sales declined in March. Meanwhile, in 31 major cities, the unemployment rate rose to a record high of 6%.
“These factors, combined with the downward demand trend that had already been visible in China’s smartphone market prior to the new pandemic wave, had a significant impact on the sector,” Mengmeng Zhang, a research analyst for Counterpoint Research, said in a report that accompanied the data release.
She predicted that China’s smartphone demand would remain “underwhelming” due to weak consumer sentiment and a lack of new innovations to entice consumers.
Not only is low demand hurting Apple in China, but so is overcapacity. China’s lockdowns are also causing supply chain issues for the company. As the city of Shenzhen implemented a COVID lockdown last month, Foxconn, a major Apple supplier, temporarily halted production at its Shenzhen facility. The Shanghai and Kunshan plants of the iPhone assembly company Pegatron were also closed earlier this month.
CEO Tim Cook said Thursday that the company’s next quarter would be impacted by $4 billion to $8 billion due to growing COVID restrictions in China, as well as industry-wide silicon shortages in the sector.
An analyst at Wedbush Securities, Dan Ives, said, “The supply chain issues continue to be a headwind in China and that will weigh on June quarter growth.”
Earlier this month, Canalys issued a dire warning to the world’s smartphone vendors, warning that China’s rolling lockdowns, the Russia-Ukraine war, and inflationary pressures pose major uncertainties.