Apple lost ground in China’s smartphone market in the June quarter after local companies like Huawei Technologies surged ahead.

iPhone shipments there slid 3.1% during the period, compared with an 11% year-on-year rise among Android-powered competitors, according to market tracker IDC. That squeezed Apple out of the top five handset makers in the country for the first time in four years.

The closely watched iPhone, central to Apple’s consumer electronics empire, has struggled to sustain its usual popularity in China this year, with retailers and Apple itself resorting to deep discounts. The country’s troubled economy has contributed to a slowdown in sales, while domestic champion Huawei led a resurgence in Android alternatives.

Market research firm Canalys also reported a 3.9% decline in iPhone China shipments in the period.

Just months ago, Apple seemed on a path to recovery when Beijing government data showed a surge of more than 40% in April and May. But shipments dropped last month due to profitability concerns among its local partners, according to IDC.

There’s also a discrepancy between what the government and research firms like IDC report. The national statistics track the number of smartphones registered with the government before getting shipped to retail stores. IDC looks at the actual deliveries to retail partners, which is more closely correlated with sales.

“We did see a year-on-year growth in the April-to-May shipments, particularly April, to prepare for the 618 shopping festival,” said IDC analyst Will Wong. “Nevertheless, the offline channel partners, which were more reluctant to burn marketing money, slowed down the pace in the last month of the second quarter of 2024 to ensure profitability.”

Difficult task

Still, assessing iPhone shipments is a difficult task — particularly in China’s more volatile post-Covid environment. In May, CEO Tim Cook surprised many analysts when he said iPhone revenue in the country grew during the March quarter, despite widespread estimates that shipments had fallen.

In the latest quarter, the resurgence of Huawei, whose shipments improved by 50%, and the bruising contest among local players like Vivo and Xiaomi pushed Apple into sixth place in the market, according to IDC. It came in a quarter when iPhone shipments globally stabilised. Apple reports its earnings for the period on 1 August.

Globally, the company aims to ship at least 90 million iPhone 16 devices in the latter half of this year, counting on AI services to fuel demand for its new line-up after a rocky 2023. The company told suppliers and partners that it’s targeting about 10% growth in shipments of new iPhones compared with their predecessors.

“The company is in much better position today in China than it was back in 2020, with a significantly higher share – 13.6% now vs. 8.3% in the third quarter of 2020 — and almost 40% higher shipment volume,” said IDC analyst Nabila Popal. — Vlad Savov and Gao Yuan, (c) 2024 Bloomberg LP