Apple continues its cliff-dive in the Q3/24 Chinese market – not its fault (smartphone)

Apple continues its cliff-dive in the Chinese market, but it’s not because locals don’t want it. The Chinese Government (CCP) has introduced buyer subsidy programs that encourage home-grown brands.

From 8 January 2025, buyers can get a 15% rebate on Chinese-made and owned smartphones, tablets, smart rings and smartwatches priced under CNY6,000 (approximately A$1200) and capped at A$100 per product. China does not have a consumption tax like our GST for home-grown products.

This subsidy has rocketed vivo (BBK family) to the top with a 10.3% growth YoY and Huawei with a 50.1% growth YoY. Apple comes in third place with a negative 5.4% growth, barely above #4, tied with OPPO and Honor.

In essence, the CCP has driven a financial nail into the coffin of any foreign-owned devices, whether made there or not.

This is globally important and economically disastrous

First, it will affect Apple’s forthcoming earnings call after the company’s $36 share price drop from 26 December to 24 January. The impact was not just from the CCP subsidy but also Indonesia’s ban on selling iPhone 16 models. Indonesia is the fourth-largest Asian smartphone market, dominated by Oppo, Xiaomi, and Samsung.

AI is also part of the issue. Apple Intelligence will not currently work in China. Local makers have the advantage of successfully using Baidu’s AI models developed for the Chinese market. According to Reuters, Apple’s privacy policies do not allow data collection from iPhone users who make AI-related queries. Still, Baidu insists it must save and analyse this data, thus making it readily available to the CCP.

Read Give TP-Link a break – No spyware for you to see the impact of data stored in China subject to Articles 37 and 51 of the Chinese Cybersecurity Law.

Escalating geopolitical issues between China and the new US President is a minor contributor. Still, the CCP’s message of buying Chinese-made goods to earn social and financial credit is far stronger.

Why the shuffling of deck chairs?

Vivo now leads the Chinese market

Vivo is driven by its user-centric approach across all price segments and its focus on hardware advances and software development. It has always been the workers’ phone and has a huge retail network across China, enabling same-day delivery. Apple is typically 18-24 days for the iPhone 16. Vivo also recognises AI is not the driving force, and most of its models support easy-to-use Baidu cloud-based AI assistance.

Huawei is back, baby, with a massive 50.1% YoY growth.

While the US and other Western countries’ 5G equipment infrastructure ban did not include its smartphones, the Huawei name became persona non grata in the West. It suffered major production losses and impetus as it fought the battle. In 2020, it sold its Honor brand to a consortium comprising over 30 companies, including agents, dealers, Shenzhen government-backed entities, China Telecom and e-commerce platform Sunning.com Group.

Put simply, Huawei has recovered and is now the leading prestige brand in China. It uses Chinese-developed chips and its Harmony OS, which does not include any Google apps (Google cannot operate in China). It does this by offering features at prices well below Apple’s.

Honor has grown to 15% of the market from a standing start

But it is down 8.1% YoY, mainly due to Huawei’s massive ascent. Honor has the advantage of international markets to increase its economies of scale, and China Telecom’s backing in China does not hurt either.

OPPO tied fourth, losing 6.4% YoY to Huawei

OPPO’s latest Find X8 Pro OPPO Find X8 Pro – at last, flagship competition and the uber-featured Ultra version sold only in China helped it remain in the top 5 Chinese makers.

 Coming in #5 is ‘Others’, which collectively has a 20.8% market share and a 7% YoY improvement

These notably include Motorola, which, ironically, Chinese buyers regard more as a ‘foreign brand’ despite being owned by Lenovo.

CyberShack’s view: Apple continues its cliff-dive is not good for the West

Simply put, Made in China 2025 – a policy with intended consequences (MIC 25) has come of age. Its global domination in 10 key tech areas is almost complete. That also means self-sufficiency. China does not need the West apart from raw materials, primary products and perhaps our university education exports.

Conversely, we need China because no other country can fulfil our import needs.

 MIC 25 means that around 20% of global demand is now self-fulfilled, hurting Apple et al.

But it is more significant than that

China’s first 158-seat passenger jet, C919, is now widely used in Asia. It significantly undercuts the price of Boeing’s 737 MAX and Airbus’s A220/320 comparable models. It reportedly has 1003 orders and hundreds of options these companies would have supplied. The success does not stop there—it has a new range extending seating to 240, High-Altitude use (Tibet), Extended range (long haul), freight, and luxury. Wide-body jets are in the planning stages.

MIC 25 is also decimating local makers for (% represent 2024 global market share estimates)

• Green power (95% solar panels, inverters, batteries, air turbines)
• Rail (80% engines, carriages and rolling stock)
• AI (DeepSeek wiped trillions of the US share market on 28/1/25)
• Cargo ships (90%)
• Pleasure boat building (57%)
• Robotics (60%)
• Electric Vehicles (76% of EVs and a corresponding drop in petrol/diesel car sales)
• Biotech (percentage unknown but estimated at 25% minimum).

In fact, the CCP has publicly ventured that if the USA can force TikTok to sell to Western interests, Apple should be forced to sell its Chinese activities to Chinese interests. That explains Trump’s 75-day reprieve and admission that a joint venture may be preferable.

Whatever the outcome, it is way beyond our pay grade.

Apple continues to cliff-dive

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