Apple really wants the iPhone 16 to be a success in China

Apple is set to unveil its newest range of iPhones at its Cupertino headquarters on Monday, at a time when its sales in China – the company’s most important international market – have slumped in the face of declining consumer interest.

Apple is losing ground in China

Apple received strong warning signals in China in the first six weeks of the year as iPhone sales fell 24 percent, according to data from research firm Counterpoint. The downward trend continued in the following months.

Counterpoint data released at key points throughout the year showed a 19.1 percent year-on-year decline in Apple’s share of China’s smartphone market sales in the first quarter, followed by a 5. 7% in the second quarter.

It’s a worrying sign for Apple, which already got a hint of changing consumer sentiment in China in its last full fiscal year. The company reported a rare drop in net sales to $72.6 billion from $74.2 billion a year earlier.

It is worth noting that in its 15-year history with the iPhone in China, Apple has been the dominant force in the smartphone market. iPhones have come to represent a symbol of wealth for the citizens who carry them around and have also overtaken offerings from local rivals.

But that has changed over the past year, largely due to the rise of premium smartphones from domestic vendors hoping to prove that their devices are now competitive with the iPhone. Huawei was the biggest gainer among Apple’s Chinese rivals.

According to Counterpoint, Huawei’s smartphone sales increased by almost 70% in the first three months of 2024 and by 44.5% in the following three months, during which it benefited from discounts offered during the 618 shopping festival.

Key to Huawei’s success has been the release of new phones over the past year, such as the Mate 60 Pro and Pura 70 Ultra. These phones come with advanced processors that China used to source from the US before export controls came into effect and speeds that match 5G.

Other local smartphone makers, including Honor, Xiaomi and Vivo, have also posted gains over the past year. Can Apple take them over?

Bet on Apple Intelligence

Apple will, of course, be hoping that its new generation of phones can bring about a change.

The upcoming iPhone 16 will introduce users to Apple Intelligence, its new suite of generative AI features first introduced at its Worldwide Developers Conference in June.

Cook will hope that Apple Intelligence, which will only be available on the iPhone 15 Pro and iPhone 16, will trigger an upgrade cycle as consumers try to test a technology that he says will “provide really useful information.”

Apple customers in China will still have to forego a key part of the smartphone maker’s new AI features, as its partnership with ChatGPT won’t be rolling out in the country. The company is looking for a local partner to bring more advanced chatbot features to Apple Intelligence in China.

In a research note on Friday, analysts at Wedbush wrote that they expect the “key region of China to see improvement and acceleration in growth” again with the launch of the “highly anticipated AI-driven iPhone 16” lineup.

Meanwhile, Paolo Pescatore, founder of research firm PP Foresight, told Business Insider that Apple “still has an enviable position of strong, tightly integrated hardware, platform and services,” an offering he sees as having an advantage over by local rivals from China. .

Apple will bet on consumers buying the hype behind its AI.