Since its first release in 2006, the iPhone has achieved great success worldwide with its revolutionary multi-touch technology and sleek operating system, becoming synonymous with the smartphone industry. In China, the world's largest smartphone market, the iPhone has also topped the sales list for many years, accounting for more than one-fifth of the market share.
However, in the past two or three years, with the rapid rise of domestic brands such as Huawei and Xiaomi, the performance in the Chinese market has gradually faded. According to market research institutes, shipments in China in the fourth quarter of 2023 saw a double-digit decline, and market share also decreased by 3.5 percentage points from the same period last year. Entering 2024, the decline has been further exacerbated, with a dismal decline of nearly 30% year-on-year in January. If this momentum continues, Apple's shipments in the Chinese market could shrink by more than one-third in the coming year, which is undoubtedly a heavy blow to the world's largest smartphone brand.
Severity of atrophy
The specific data proves that the iPhone has reached a crossroads in the Chinese market. According to the latest statistics from the International Data Corporation (IDC), China's smartphone shipments will reach 332 million units in 2023, a year-on-year increase of 8.6%. Although this growth rate is exactly the same as the 8.9% increase in global growth in 2022, it is significantly slower than China's 14.6% growth in 2021. This shows that China, the world's largest smartphone blue ocean market, is close to saturation, and the growth rate below the global average indicates that the competition between brands will become more intense.
On the contrary, in 2022, iPhone shipments in China will only be about 42 million units, a sharp decline of 11.4% year-on-year. Entering the fourth quarter of 2023, the iPhone only accounted for 13% of China's smartphone market, a sharp contraction of 3.5 percentage points from 16.5% in the same period last year. Its sales volume also showed a negative growth of about 13% year-on-year. This decline far exceeded the 8.6% year-on-year growth rate of China's smartphones as a whole in the same period, indicating that the iPhone has clearly lost its competitive strength against domestic mobile phones.
What is even more difficult for Apple to accept is that the situation will deteriorate further in 2024. According to statistics from well-known domestic technology media, the iPhone in China's mobile phone market accounted for only 8.1% of the market in January, down 26% year-on-year, and shipments also saw an astonishing decline of 30%. That's pretty much the coldest treatment Apple has ever received in its home market during the coldest season in China's mobile phone market, when it launches a brand new product. China's contribution to Apple's global revenue also fell from 20% last year to a record low of around 17%. This indicates that the desolation of the iPhone in China is likely to continue or worsen in the coming year.
国产旗舰崛起,压制iPhone
What is the reason for such a huge decline of the iPhone in China, which was once a stronghold of fans? Outside analysts believe that the main reason is that Huawei and other domestic mobile phone brands, especially high-end flagship product lines, have risen sharply. This suppresses and directly squeezes the living space of the iPhone in the price range of more than 3,000 yuan.
Specifically, in the past three years, affected by the US blockade, Huawei's mobile phone business has been in deep trouble. However, since the realization of independent and controllable chips in terms of chips, Huawei's flagship mobile phones have also begun to gradually recover. In particular, the Mate50 series, which was released in August last year and is equipped with the self-developed Qualcomm Snapdragon-level processor "Kirin 9000", has made Huawei re-emerge in the high-end market with its powerful performance and unique spatial surround stereo camera, and won back many users who are seeking flagship performance and configuration in one fell swoop. What's more, the continuous supply of this mobile phone has been tight since its release, which has further fermented the social prestige effect of "what you can't buy is good" and has become a national-level trend.
According to IDC, Huawei is the only manufacturer to achieve double-digit growth among the top five manufacturers in China's smartphone market in 2023, with a year-on-year growth of 10.1%, once again surpassing Apple and Vivo to rank second. Only in the high-end mobile phone market with a price of more than 3,000 yuan, Huawei has achieved an astonishing growth of up to 172%. This directly squeezes out the iPhone's share as a high-end option. At the same time, other major manufacturers such as Xiaomi, OPPO, and vivo have achieved substantial growth in the ultra-high-end market with higher prices above 4,000 yuan, although their overall shipments have been flat or declined slightly. This means that the iPhone lacks a real competitive differentiation and is no longer outstanding in terms of cost performance.
On the contrary, as a foreign brand, iPhone has always been at a disadvantage in terms of localization. According to consumer research conducted by the Zhongguancun Research Institute, more than 65% of users surveyed said they would prefer to buy a Huawei phone, Xiaomi or vivo with local attributes over foreign brands such as Apple or Samsung. This is mainly due to the fact that the latter is closer to the preferences of Chinese mass users in terms of product aesthetics, price level and customized services. In contrast, the iPhone lacks that "hometown flavor" sense of cultural identity and substitution.
Price and innovation, the soft underbelly of the iPhone
In fact, not only Huawei, but also Xiaomi, OPPO and other brands have made a large-scale layout in the price range of more than 4000 yuan in recent years, and have continuously launched a variety of high-quality products using leading technology and technology. This forced the iPhone to improve its specs and increase innovation to maintain its brand premium. But the data shows that the iPhone is starting to show weakness on both fronts:
First of all, there is a problem with the pricing strategy of the iPhone. According to user surveys, more than 78% of Chinese consumers believe that the price of the iPhone, although in line with their brand status, is still expensive, beyond the affordable range of most users. Compared with folding screen phones like Xiaomi Mix Fold, which also have disruptive new technologies, the price is less than 8,000 yuan, and the starting price of 9,999 yuan for the iPhone 14 Pro Max is undoubtedly too "cutting leeks". This is especially prominent today when the overall consumption environment has deteriorated and user price sensitivity has increased.
Secondly, the performance of the iPhone in technological innovation is also much worse than before. Industry reviews believe that the iPhone 14 series does not have many revolutionary innovations compared with the previous generation 13 series, and mainly stays at the iterative level of some modules and parameters. But this is obviously difficult to compete with cutting-edge technologies such as folding screens and invisible cameras introduced by domestic brands such as Xiaomi and Huawei. This has further weakened the power advantage of iPhone's technical products, and also led to a decline in consumers' excitement and willingness to update. In 2022, the renewal rate of iPhones in China is only 11.3%, which is far from the 26% that brought a super high update wave in 2018.
In addition to price and technological innovation, the localization level of iPhone in other aspects such as channel construction, content services, and brand communication is also obviously insufficient. The sum of these factors has directly led to a rapid decline in the competitiveness and attractiveness of iPhone products in the Chinese market, and it is facing a comprehensive suppression from domestic mobile phones. If this development continues, it is likely to fall from the top to the third place or even the last position within two years, and completely become a niche plaything.
Improvement strategy: localization and differentiation
In the face of such a grim situation, it is far from easy to reverse the decline in the Chinese market. It must face up to changes in the consumer and competitive landscape, and make major adjustments in product and market strategies to open up new horizons.
First, localized design and services must be further strengthened. The aesthetics and enthusiasm of Chinese users for new technologies determine the need to strengthen local team building and develop products that are more in line with local culture and preferences. At the same time, it will enrich content services, strengthen cooperation with local developers, and provide apps that are closer to the needs of Chinese users.
Second, we will make every effort to catch up in the application of innovative technologies such as folding screens and fast charging, and re-establish the image of technologically advanced products. This will require more R&D investment to make the iPhone a new technology demonstration platform.
Third, adjust the price strategy and boldly enter the low-end market. Not only will this increase market share, but it will also help build a wider range of brand loyal users. At the same time, more flexible purchase support plans are available, such as installment payments, trade-ins, etc.
Fourth, strengthen the construction of offline channels. There is still a big gap between the number and coverage of domestic brands, which restricts the iPhone's ability to reach and lock users. The expansion of offline channels is particularly important.
Fifth, carry out localized communication and operation. This requires product design and brand marketing based on Chinese culture and emotion. At the same time, it excavates Chinese elements and launches themed activities or co-branded editions at important festivals or cultural events to enhance cultural identity.
Sixth, make organizational changes cautiously and prudently. Integrate the top management in China, and make decisions with a management team that is more sensitive to the local market and culture. This will also strengthen China's strategic autonomy and respond more quickly to local market needs.
If we can complete the above-mentioned adjustments and upgrades at multiple levels such as localization and differentiation as a pioneer and changer, I believe that the iPhone still has the opportunity to open up a new situation in China, a huge potential market. After all, it's home to more than 500 million smartphone users and millions of loyal Apple fans. This "blue ocean" is worth re-cultivating at all costs.
All in all, the current decline in the Chinese market has undoubtedly reached a critical point. This downturn is not only due to the attack and suppression of domestic brands, but also to the lack of adaptation of iPhone's own market strategy and organizational structure to local culture and user changes. In order to reverse the declining trend, we must make a comprehensive breakthrough and reconstruct ourselves in localization and differentiation. It is hoped that Apple's management will take a long-term view and defend and regain this vital strategic high ground as a pioneer.