Apple loses top spot in China as smartphone sales drop

Just three months ago, Apple became the best-selling smartphone brand in China for the first time in six years. Now it has lagged behind its Chinese rivals after suffering more than others from a drop in sales in the first quarter.

Two research reports published this week showed Apple dropping to third place behind Chinese Android device brands.

The shift in market rankings comes as China faces a sharp economic slowdown and Covid-19 restrictions put the brakes on consumer spending.

Smartphone sales in China dropped 14% in the first quarter, with volumes falling “close to levels seen during the severe impact of the pandemic in the first quarter of 2020,” Counterpoint Research said in a report on Thursday.

Apple’s sales were down 23% in the three months to March compared to the previous quarter, Counterpoint Research added. The company enjoyed rapid growth in China last year, shortly after the launch of the iPhone 13.

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

A report by Canalys on Friday also showed that Apple dropped from market leader in China to third place, with its first-quarter shipments down 36% from the previous quarter. Canalys tracks shipments from manufacturers to outlets rather than sales to consumers.

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

Chinese brands – including Vivo, Honor and Oppo̦ – fared better than Apple as their sales rebounded after suffering from the strong performance of the iPhone 13 in the last quarter of 2021, Lam added.

Overall, a seasonal decline in demand and major economic uncertainty dragged the market through the first few months of this year.

“I don’t think the Q2 data will improve much as the ongoing lockdowns will continue to affect consumers’ willingness to spend,” Lam told CNN Business.

There are currently total or partial lockdowns in at least 27 cities in China, affecting up to 165 million people, according to CNN calculations. Shanghai – the country’s main financial hub and a major manufacturing hub – has been closed for more than a month. The restrictions forced many businesses to close and dealt a major blow to economic activity.

China’s economy has slowed sharply over the past two months. Retail sales contracted in March for the first time in more than a year. Meanwhile, unemployment rose to a record 6% in 31 major cities.

“These factors, combined with the downward trend in demand already visible in China’s smartphone market before the new wave of pandemic, significantly impacted the industry,” said Mengmeng Zhang, research analyst at Counterpoint Research, in the report accompanying the launch. of data.

She expects smartphone demand in China to remain “unsatisfactory” because of weak consumer sentiment and a lack of innovations to stimulate consumers.

It’s not just weak demand that is hurting Apple in China. The company is also facing supply chain challenges stemming from China’s lockdowns.

Foxconn, a major supplier to Apple, halted production at its Shenzhen factory 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 Thursday during an earnings call that China’s increasing Covid restrictions, along with industry-wide silicon shortages, would affect the company’s next quarter by $4 billion to $8 billion. .

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

Earlier this month, Canalys warned that smartphone providers around the world face great uncertainties due to China’s ongoing lockdowns, the Russia-Ukraine war and the threat of inflation.