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Apple’s iPhone sales struggles in China continue, with Credit Suisse analysis on data from the country’s Ministry of Industry and Information Technology suggesting a year-on-year drop of 35% in November. This drop has come despite the Chinese smartphone market being slightly up and follows a double-digit drop in October of 10.3%. Apple’s iPhone sales are being hit by a number of factors—including the timing of the iPhone 11 launch and the lack of a 5G offering. But the main issue hitting iPhone sales is Huawei, which has now captured a staggering 42% of the Chinese market.
As I reported in October, Huawei’s third quarter performance was extraordinary. “Huawei’s sixth consecutive quarter of double-digit growth comes amid a gloomy China market,” market researcher Canalys said of Huawei’s 66% annual growth. And while this surge has clearly stalled Apple’s progress, it has also had a punitive impact on Huawei’s domestic rivals. The context behind Huawei’s success comes down to a patriotic response to the U.S. campaign against the company, as well as marketing and pricing incentives being poured into the market.
But the issue goes beyond Huawei. Apple also trails those other domestic players—Vivo, Oppo and Xiaomi—and its 5.1% annualised market share it record in the third quarter represents a year of decline. There was something of a boost when the iPhone 11 launched, with some strong early sales, but that has not endured. The fact those models do not include 5G connectivity is a major issue for the U.S. giant. “Apple faces a looming challenge,” Canalys warned, “as Chinese vendors and operators drive heavy marketing and promotions around 5G in the next two quarters.” Apple’s double-digit declines in both October and November clearly support that view.
Meanwhile, Huawei is on track to capture Samsung’s crown for global smartphone sales at some point next year. While driven by its strong sales in China, the company will need to resolve its international sales challenge which centres on the loss of Google from its devices. The recently launched Mate 30 has struggled outside China without the familiar software and services expected by Android consumers. Now Huawei will want a different outcome for the next flagship, the P40 Pro, which is expected to be launched in the first few months of 2020.
And on this front there could be some good news for Huawei over the coming weeks. The U.S. is now starting to issue licenses to American companies seeking to supply the Chinese company, including to Microsoft. If Google can secure one of those licenses, then there will be something akin to a return to business as usual for Huawei. If Google does not achieve one of those licenses, the optics will be challenging for the U.S., with the implication that it’s punitive and not security related.
For its part, Apple is expected to launch a range of 5G iPhones next year, and will have strong expectations as to the sales success these might enjoy in China once released—notwithstanding the twelve-month head start its rivals now have to secure further market share. Apple will be hoping it can stabilise any further declines in the nine months before those devices are expected to hit the market.