Apple iPhone Sales Slump 6% in China, Market Share Drops to 6th

According to research firm Counterpoint, Apple’s iPhone sales in China declined 6% during the critical first eight weeks of the third quarter, a particularly worrying development given that the overall smartphone market contracted by just 2% during the same period. This performance drop pushed Apple to sixth place in market share with just 12% of the world’s largest smartphone market, which boasts over one billion users—more than three times the size of the U.S. market. The company now trails behind global rival Samsung and local Chinese manufacturers Xiaomi, Oppo, Huawei, and Vivo, all of which have incorporated some level of artificial intelligence features into their operating systems.

This competitive disadvantage is particularly significant given that Apple is not expected to launch its own AI product until next year. While Counterpoint notes that AI is not currently the primary driver of smartphone purchases, Apple’s delayed entry into this technological arena represents a substantial strategic vulnerability. The local Chinese companies, which were once considered minor threats, have now evolved into formidable competitors capable of challenging Apple’s premium positioning in the market.

The sales decline carries significant financial implications for Apple, given China’s importance to the company’s global revenue stream. Apple’s “Greater China” sales showed minimal growth, increasing from $14.7 billion in the second calendar quarter last year to $15.4 billion in the most recent period. This sluggish performance stands in stark contrast to the company’s American sales, which reached $41.2 billion during the same timeframe. Given China’s massive population and smartphone penetration, Apple desperately needs stronger sales growth in this region to maintain its global market position.

The fundamental challenge lies in the upgrade cycle dynamics. The upcoming iPhone 17 faces the same test that has plagued Apple in the United States: whether minor feature improvements—such as a better camera, slimmer case, or more powerful chip—will provide sufficient incentive for consumers to upgrade from their iPhone 16 models. With smartphone innovation plateauing and replacement cycles lengthening, Apple’s traditional hardware upgrade strategy appears increasingly vulnerable.

Beyond market competition, Apple faces growing geopolitical risks that could further undermine its China operations. Former President Trump has already threatened the company with tariffs if it maintains Chinese manufacturing at current levels, prompting Apple to counter with promises of U.S.-based production. However, ongoing trade negotiations between China and the United States remain unresolved, creating uncertainty for all U.S. companies with significant Chinese footprints.

This tariff threat compounds Apple’s existing challenges in the region. The company’s extensive supply chain dependencies in China make it particularly vulnerable to trade tensions, potentially forcing costly restructuring of manufacturing operations or absorbing higher costs that could further erode competitiveness. Until trade negotiations conclude, no U.S. company operating in China can consider itself safe from disruptive policy changes.

Apple’s path forward in China appears increasingly challenging. The combination of competitive pressure from local AI-enabled devices, slowing upgrade cycles, and geopolitical risks creates a perfect storm that threatens the company’s position in its most important international market. The critical question remains whether Apple can accelerate its AI development timeline and deliver compelling features that justify premium pricing in a market increasingly dominated by capable local alternatives.

The company’s experience in China serves as a cautionary tale for global technology firms operating in competitive international markets. As local competitors mature and technological differentiation narrows, even industry giants like Apple must continuously innovate and adapt to maintain market leadership. With AI expected to become a primary driver of smartphone upgrades in the coming years, Apple’s delayed entry into this space could have lasting consequences for its competitive position in China and beyond.