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Why Are Apple iPhone Sales Struggling in China?

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Apple loses market share to domestic giants

According to a report by Strategy Analytics, Apple’s (AAPL) shipments fell from 9.7 million units in 2Q15 to 7.3 million units in 2Q16 in China. Apple’s market share in China (FXI) also fell significantly from 9.2% in 2Q15 to 6.7% in 2Q16. The firm attributed this drop in sales to the mixed demand for the iPhone 6S in the country.

Apple has been facing increasing competition from domestic heavyweights such as Vivo and Oppo. These firms have improved device quality as well as brand awareness among customers and sell devices at much lower prices compared to the Apple iPhone. Vivo’s share rose from 7.4% in 2Q15 to 11.9% in 2Q16. Oppo’s share doubled from 6.9% to 13.9% in the same period.

China is the largest smartphone market in the world and grew at a rate of 3.7% YoY (year-over-year) in 2Q16. It also remains the second-largest market for Apple after the United States.

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Apple sales from Greater China fell 33% in 2Q16

Apple’s (AAPL) revenue from Greater China, which includes China, Hong Kong, and Taiwan, fell 33% YoY (year-over-year) from $13.2 billion in fiscal 3Q15 to $8.8 billion in fiscal 3Q16.

Apple generates almost 60% of its revenue from non-US markets. Thus, falling revenues from China and other economies will pose a challenge to the firm. Apple’s market position in China fell from being the third largest smartphone manufacturer to the fifth largest manufacturer.

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