Apple (AAPL), the tech giant with a $3.58 trillion market cap, is facing a significant challenge in maintaining its foothold in China, as reported by supply chain analyst Ming-Chi Kuo. The company’s stock took a hit Friday, dropping $5.85 or 2.41% to close at $236.85. This downturn is attributed to a decrease in iPhone shipments, signaling a loss of market share in what is one of the world’s largest smartphone markets.
Kuo’s analysis reveals a cautious approach by Apple towards its 2025 iPhone production plans, where discussions with key suppliers have been notably conservative. Despite the anticipation around the launch of the iPhone SE 4, the analyst says that the expected shipment numbers are set to decrease by 6% compared to the first half of the previous year. This cautious outlook is further compounded by the design choices for upcoming models. Kuo points out that the ultra-thin iPhone slated for the second half of 2025 and a foldable iPhone in the planning stages will likely only support eSIM. Given the current lack of promotion for eSIM-only phones in China, these models might struggle with market acceptance unless Apple revises their designs.
The situation in December 2024 painted a clearer picture of Apple’s struggles. While overall smartphone shipments in China held steady compared to the previous year, iPhone shipments specifically saw a 10-12% year-over-year decrease, illustrating Apple’s diminishing market share in this crucial region.
Moreover, Kuo’s insights into Apple’s strategy with its on-device AI, known as Apple Intelligence, reveal another layer of concern. There appears to be “no evidence” that this feature is spurring demand for new iPhone purchases or increasing services revenue. According to Kuo’s supply chain survey, the feature has not significantly motivated consumers to upgrade their devices, with its appeal seeming to wane against the backdrop of rapidly evolving cloud-based AI services.
Apple’s projected iPhone shipments for 2024 are approximately 220 million units, with a slight uptick expected for 2025, ranging between 220 to 225 million units. However, these numbers fall short of the market’s expectations, which were set at around 240 million units or more. Dan Ives, Global Head of Technology Research at Wedbush Securities, recently expressed confidence in Apple’s ability to reach 240 million iPhone sales in fiscal 2025, citing significant advancements in AI integration and a robust supply chain as key drivers. This discrepancy between Apple’s performance and market expectations underscores the challenges the company faces, not only from a product design perspective but also in adapting to market preferences and technological trends in one of its most critical markets.
Apple’s journey in China reflects the broader tech industry’s dynamics, where innovation, market fit, and consumer preferences play pivotal roles in determining a company’s market position. As Apple navigates these waters, the focus will likely intensify on how it adjusts its product strategy to regain lost ground in China’s competitive and evolving smartphone landscape.
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