Apple faces ongoing headwinds in the crucial Chinese market, with slumping iPhone sales, fierce competition from domestic brands, and regulatory hurdles surrounding AI.
Fortune reports that Apple’s sales in China declined 11.1 percent to $18.51 billion during the last three months of 2024, marking the company’s largest drop in the country since the first quarter of 2024. The tech giant has been grappling with intense competition from local smartphone manufacturers such as Huawei and Xiaomi, which have steadily eroded Apple’s market share in China over the past few years.
In addition to the competitive landscape, Apple has encountered difficulties in bringing its flagship AI features to devices in China. The company’s AI assistant, Apple Intelligence, is not yet available in the country due to Beijing’s strict regulatory requirements surrounding AI technologies. Apple is collaborating with Chinese internet giant Baidu to bring generative AI services to its devices in China, but the two companies are reportedly facing challenges in adapting Baidu’s AI models to meet China’s regulatory standards.
William Kerwin, a senior equity analyst at Morningstar, noted in a report that “China remained a growth headwind, with revenue declining for the sixth straight quarter.” He added, “China is a key piece of our thesis for slowing long-term iPhone growth, with Apple losing share to revitalized domestic competitors.”
Despite the setbacks in China, Apple’s overall revenue rose four percent in the first quarter of fiscal 2025, even as iPhone sales declined slightly on a year-over-year basis. The company’s positive forecast for the March quarter boosted shares by approximately three percent in extended trading.
Wedbush analyst Dan Ives commented on the earnings report, stating that “China was a clear soft spot and not unexpected down 11% although roughly half of this decline was due to inventory issues which will be mostly cleared in the March quarter.” He added, “We believe as Apple Intelligence rolls out in China we will see growth markedly rebound in this region to double digits YoY trajectory starting in the June quarter.”
Prior to the earnings call, analysts anticipated that Apple’s challenges in China would persist. Kerwin remarked, “China is now a significant headwind to iPhone revenue growth, and it used to be a pretty significant tailwind. It was an emerging growth market. Now there are more ramped-up competitive options from Huawei or Xiaomi…We still think they’ll be able to grow in China, but it’s no longer that high-growth outlet.”
On a positive note, analysts pointed out that Apple is well-positioned in its AI strategy, unlike some of its Big Tech peers that have been impacted by the rise of DeepSeek, a Chinese AI startup. Apple has focused on integrating AI models into its hardware rather than investing in building its own, which could potentially benefit from the cheaper AI models DeepSeek offers. During the earnings call, Apple CEO Tim Cook referred to DeepSeek as a positive development, stating, “I think innovation that drives efficiency is a good thing.”
Read more at Fortune here.
Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship.
