Apple loses top spot in China as smartphone sales fall

Two research reports published this week showed apple (AAPL) slips to third place, behind Chinese Android phone brands.

Smartphone sales in China fell by 14% in the first quarter, as volumes fell “close to levels seen during the severe pandemic-affected first quarter of 2020,” Counterpoint Research said in a report Thursday.

apple (AAPL)Sales fell by 23% during the three months to March, compared to the previous quarter, Counterpoint Research added. The company enjoyed rapid growth in China last year, right after the release of the iPhone 1[ads1]3.

The market share in China is now 17.9%, compared to 21.7% in the quarter ended in December.

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

China's economy had a good first quarter.  Lockdowns make it 'in need'

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

Chinese homemade brands – including Vivo, Honor and OppoĢ¦ – performed better than Apple when their sales picked up again after suffering from the iPhone 13’s strong performance in the last quarter of 2021, Lam added.

Overall, a seasonal decline in demand and great economic uncertainty have pulled the market in the first months of this year.

“I do not think the data for the second quarter will improve much, as ongoing shutdowns will continue to affect consumers’ willingness to use,” Lam told CNN Business.

There are currently full or partial roadblocks in place in at least 27 cities across China, affecting up to 165 million people, according to CNN’s estimates. Shanghai – the country’s leading financial center and a major manufacturing center – has been under lock and key for more than a month. The restrictions have forced many businesses to close down and have a major impact on economic activity.

China’s economy has slowed sharply in the last few months. Retail sales fell in March for the first time in more than a year. Unemployment, meanwhile, rose to a record high of 6% in 31 major cities.

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

She expected China’s smartphone demand to remain “subversive” due to weak consumer sentiment and a lack of new innovations to stimulate consumers.

Apple warns of severe supply headwinds in China
It’s not just weak demand that is hurting Apple in China. The company also faces supply chain challenges stemming from China’s shutdowns. Foxconn, a major supplier to Apple, halted production at its Shenzhen plant for a few days last month when the city introduced a Covid barrier. Pegatron, an iPhone fitter, also halted operations at its Shanghai and Kunshan plants earlier this month.

CEO Tim Cook said during a revenue interview on Thursday that growing Covid restrictions in China, coupled with industry-wide silicon shortages, will affect the company’s next quarter by $ 4 to $ 8 billion.

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

Earlier this month, Canalys warned that smartphone providers around the world are facing great uncertainty due to China’s rolling shutdowns, the Russia-Ukraine war and the threat of inflation.

– Samantha Murphy Kelly contributed to this report.

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