We have a wrong idea about China and the Chinese. We have that "cheap labour", "not so wealthy" idea about China created by our media. China and the Chinese had gone a long way, much further than the so-called West. If you'd go to a Chinese shop with phones, you'd notice that the iPhone just sits in a small area with few phones, 3-4 models while the others cover a lot of area. That goes in any such shop in the EU too, and in any country of Asia. iPhone is just one mobile phone in a sea of phones.
So, if the iPhone still holds the 6th place in sales in China, it tells something, but that place won't be there that long. And, most probably iPhones are much cheaper in China than in the US.
I have no doubts about the rise and expansion of the middle class in China, they have been working very hard on trying to keep their economy humming and expanding, it’s in their best interests to help the average Chinese citizen prosper, while keeping a lid on the wealthiest Chinese millionaires and above lest they become too wealthy or corrupt or powerful and become too independent of the government’s oversight.
According to various web sources, the “average” annual salary of Chinese workers is about $1700-$3800/month or about $20,400-$45,600/year. Of course, hundreds of millions make much less and a tens of millions make much more depending on their location, education, status, and work jobs. Certainly city and urban workers within tech and banking sectors make much more than their industrial, construction, mining, and farming counterparts.
The cost of living in China is much lower than it is in developed countries so in many ways their income can go much further and many people have decent housing, transport (car or cycle of some type, or rely on extensive and well developed local public transport). Certainly, the boom in Chinese adoption of personal electronics over the past 12 years or so mirrors the west.
But the Chinese consumer has been hit with many issues before, during, and after the pandemic, and China’s economy has also been hit, hard, with slowdowns in demand, mass construction of housing that has not been finished or now abandoned as financing, loans, and the banking sector has been hit with corruption, bankruptcies, and loss of confidence, very reminiscent of the US’s mortgage meltdown of 2008 and its aftermath. Over the last two years China has struggled like the rest of the world to stabilize its economy and regain its growth, concurrently trying to expand new sectors like EV manufacturing, tech, semiconductors, and contract manufacturing.
With this prosperity though comes the downside. As wages go up, costs rise for companies who have built in China. This then makes manufacturing in China more costly compared to other up and coming economies like Vietnam, Indonesia and India. Even though China has well established and extensive supply chains, they are getting more expensive all the time and face competition from other regions who are learning fast and being invested in even by Chinese companies like Foxconn, Pegatron, Luxshare and the like. Samsung closed their China factories back in 2018 and moved their low cost smartphone production to Vietnam and India, but has continued to contract with some Chinese ODMs for their low cost A0x series.
Certainly there has been a huge increase in buying power for many Chinese as they have prospered, but their spending has been hit like the West over the past two years.
According to Statista here:
In the fourth quarter of 2024, around ** million smartphones were shipped in China, up *** percent year-on-year. Smartphone market in China Since 2011, the number of smartphone shipments in China has steadily increased, reaching over *** million units in 2022.
www.statista.com
The Chinese smartphone market peaked in terms of sales in 2015-2017 and has trended downward ever since. There was some plateau in 2020-2021 but headed down again through 2023 and has just started to improve in the first half of 2024.
2023’s China smartphone sales were over 270M but this is the lowest point over the past 10 years. The high was 467M in CY2016. That’s almost a 42% drop over 8 years from its peak. Why? Much of that demand was met in the 2015-2018 period, and it’s taking users 3-5 years to upgrade or replace as they are able to afford. New users still buy value. More domestic competition provides more model and price options as you noted. But it appears as China’s economy stalled in 2022-2024, Chinese consumer spending also went down, just as it has been hit in the US and Europe. If the Chinese consumer has done so well, why have smartphone sales fallen until just recently?
While Apple is JUST ONE of literally hundreds of choices in the Chinese market each year, it does have a sizable install base of reasonably brand loyal users and does have the interest and buying power of young 14-25 Chinese consumers. As Chinese iPhone users see their 4-5-6 year old models age, they now have to decide to switch or stay with iPhones.
Apple doesn’t now and doesn’t in the future have to dominate or lead the China market in overall sales, it just has to maintain and lead in the premium segment which it still does currently although there is more competition for various reasons.
I understand the reason why Apple is not more aggressive on pricing in the middle and bottom of the market. The problem with that reasoning in China is that their consumers clearly do not see Apple's premium image. If Apple is serious about competing in one of the most important consumer markets in the world, they're going to have to compete on different terms than they do in the US and Europe.
Competing in China is going to involve being more aggressive on price and not as conservative on pushing new technologies down their lineup. They've got to recognize and deal with the different consumer perceptions on what is a premium product. Additionally, patriotism/jingoism rising as the USA and PRC relationship degrades is a significant headwind.
They probably should start by trying to reframe the iPhone as a true Chinese product instead of leaning of the Designed in California, Made in China concept. Mostly just a corporate propaganda campaign in China. Additionally, they've got to figure out a better balance of margins v. consumer desirability in the Chinese market.
I don’t disagree with anything you’ve said but I don’t think Apple is going appreciably downmarket because it dilutes their brand, cuts their pricing power if they constantly discount, and it is much less profitable. Expending so much effort for “market share” but little additional revenue or profit gains is a fools errand for Apple. They’ve tried that half heartedly with the iPhone SE models but the competition in that segment is fierce. The recent suggestion or rumor that Apple is working on Foldables for 2026 suggests they will go upmarket in China instead and that’s consistent with its brand, marketing and success.
As for Apple’s image, I think most Chinese KNOW the iPhone is assembled in China, but designed in California/US. To Chinese, California is an enviable and aspirational place, but certainly the government has tied Apple and other US companies to US policies. Ironic isn’t it, attacking Apple while Apple provides billions of dollars in Chinese worker’s wages and jobs, but it’s not the first time politics rules over economic interests. Or that Xi gets points for both at the same time. Meanwhile, nobody notices the Chinese buy literally hundreds of thousands of tons of soybeans, rice, pork bellies, almonds, and other food staples from US sources.
Same goes the other direction, loud US conservatives bash “woke” Apple for “shipping and outsourcing jobs internationally” while “claiming” to be a US company, iPhones are made in China by slave labor (but best assembly wages among all China production, you really think Chinese OEMs can pay more to their assembly workers while trying to sell $100-$400 smartphones?? They have to keep costs low enough to make a profit too.). So Apple can’t please anybody so it’s simpler to just tell the truth, stick to it, and let people individually decide what they want. Sure, maybe there’s some patriotic Chinese buying but it’s more likely simply price and perceived value. As noted below “pragmatic” Chinese buyers buy midrange because that to them is the best value or that’s what they can afford, nothing wrong with that. But Apple caters to higher value customers who DO see value in Apple
Products over the long haul (3-5-7 years) and are willing and able to pay the premium Apple gets. If that really changes, then Apple will have to adjust its product and selling strategies.
If the iPhone, or any other Apple product can only be made in China, then one should really ask, what is this Designed in California talk? Most probably most of it is actually designed in China, and by the Chinese themselves.
The iPhone and most other Apple products ARE designed in California with inputs from regional tech and design centers across the world. In turn, Apple works with its assemblers and supply chain (TSMC, Foxconn, etc.) to source parts, chassis, hardware, subassemblies, and production methods to ensure the supply chain works well, especially at Apple’s sales volume level requirements. Apple’s chips are designed by teams in California, Germany and Israel. The primary integration of parts is done in California based prototyping labs. So yes, some of the Chinese suppliers are involved with helping design pieces and parts and the assembly process, but Apple has the final say and approval. But right now China only supplies about 15% of displays, 0% of modem and CPU chips, 20% of memory chips, 30-50% of camera modules, maybe 50% of batteries, etc. Apple’s supply chain is global so they source from whoever can make what they want, at quality, volume and prices agreeable to Apple and supplier. Wholly made and designed by China? No.
And only made in China?, also no as evidenced by now 15% of iPhones are now made in India from literally zero 6 years ago, a lot of Apple products are also made in Vietnam.
More storage thanks to a microSD slot, dual-SIM pretty much standard outside the US, headphone jack for superior audio to bluetooth, higher refresh rate display in the lower end, foldable (gimmicky or must have, no in between), higher capacity battery, and so on and so forth.
Apple lowering the price of the iPhone in China and it's not selling well is pretty telling. Price ain't as big a factor anymore. People want value. Unlike in the US where the blue/green bubble is the deal breaker. The iPhone is a feature sparse for the asking price.
Given a choice between a Tacoma (can handle any kind of pavement, a workhorse, reliably as the sunrise) and $150K pocket money or a Ferrari (really fast on smooth pavement, looks good, status symbol), practical folks will choose the Tacoma. Most of the Chinese I know are pragmatic folks.
Yep, microSD slot is a decided advantage, yet none of those individual models that have it sell anywhere as many or at the prices as iPhones do. As for dual sims, for those that need them, sure, it’s great. But more and more telecoms worldwide are supporting e-sims and that’s going to render physical sims eventually obsolete. The less trays, openings, electrical contacts, and potential water ingress points the better. Just as checks and physical credit cards have given way to electronic banking and contactless mobile payments, physical and multiple physical sims will eventually fade.
I agree some wired earphones and headphones sound better than Bluetooth earbuds like AirPods, but that means actually spending bigger money for BETTER quality wired like AKG, Sennheiser, etc. instead of the typical $10-40 cheap Asian wired stuff that most non-audiophiles buy. If that works for you and others, great! But and with wired, you get hassles, tangles, knots, catching on everything, ripping out of your ears, dangling wires which looks stupid, and of course, when your wire or connector breaks, you toss them. Face it, most wired headphones and buds ARE CHEAP, look anywhere they are sold, and that’s what they sell on - price, not performance or convenience, plus it’s an OLD Technology from the 70’s through the 90’s. Like it or not, most of the flagships have abandoned them. Wireless audio is good enough to very good for a large segment, especially the premium segment, offers true hands free, wire free listening, and oh yeah, can you ask Siri, make calls, adjust volume, mute with wired buds without pulling your phone and wires out? And what about true switchable noise cancelling instead of just noise isolating with sealing in ear buds? And can your wired earbuds eventually become active hearing aids, Spatial Audio, or can be shared easily to an iPad, other iPhone, car, or Apple TV box, simultaneously even? No? Then really what are they? Dinosaur tech.
Higher refresh rates displays are a distinct marketing advantage for midrange. Beats the old LCD panel of the iPhone SE for sure. But the “high refresh rate” OLED panels you see in midrange phones of necessity and parts prices are cheaper quality panels by design and price because the top of the line panels aren’t affordable at midrange phone prices, not enough margins. And then they are coupled with middle of the road, midperformance chipsets from Samsung, Unisoc, MediaTek, Qualcomm (gotta cut costs there too). Even the super high refresh rate panels found in Android flagships, many are limited and throttled in everyday use. Why? It takes power to run them at high rates and nits, cutting battery life. Yeah, you can adjust it to the way you want but it’s always a compromise. Same the need or want with bigger batteries - wow, 5000mah batteries, all to power extra RAM, more pixels, more nits, more heat but not much more if any improvement in sustained performance and overall daily battery life. That’s why many Qualcomm CPU’s overheat and throttle, requiring all kinds of “innovative” cooling systems and heat management to keep running smoothly lest they jitter and stutter or simply throttle and shut down.
Why is it even though Apple has “smaller” batteries, it has similar or longer battery life compared to larger batteried Android or PC counterparts?
Much more to do with CPU processor performance with highly power efficient designs and chip processes which Apple and TSMC have taken created and advantage of. And yes, all current and recent models of iPhones have some of the best OLED displays Apple can spec and source from Samsung Display. Apparently the 60hz refresh rate hasn’t limited iPhone 14 or 15 sales much if any while the Pro models with 120hz refresh rate sell even better.
I don't disagree with people and particularly the pragmatic Chinese looking for and seeking “value” in their product spending. But features and specs for the average user who is not a technophile are fine but not overwhelmingly influential, the ease of use, integrated ecosystems, resale value, product support, and then yes, pride of ownership still has many Apple supporters.
So much so that in Q4 2023, after iPhone 15 introduction, according to Canalys, Apple had the #1 position with 17.5M sold out of 73.9M total in China, market share of 24%. That helped Apple to ascend to the #1 spot for all of China’s 2023 smartphone market with 51.8M sold and 19% of the 272.5M market, even with Huawei’s Mate introduction in August 2023.
IDC examines consumer markets by devices, applications, networks, and services to provide complete solutions for succeeding in these expanding markets.
www.idc.com
With roughly 17.5+9.7+10.8M (Q1) = 38.0M units so far for Apple’s FY2024, about 13.7M units short of 2023’s iPhone sales.
Apple sold ~10.6M on Q3 2023 so it would take a strong showing for the iPhone 16 to get >13M sales in the Sept. quarter.
