Apple's Chinese Dream: From Peak to Valley, What's Next?

Apple's Chinese Dream: From Peak to Valley, What's Next?At the beginning of 2024, Apple suffered a setback in the Chinese market. Pre-orders for the iPhone 16 series were dismal, with sales far lower than expected, resulting in a significant evaporation of Apple's market value and a continuous decline in its stock price

Apple's Chinese Dream: From Peak to Valley, What's Next?

At the beginning of 2024, Apple suffered a setback in the Chinese market. Pre-orders for the iPhone 16 series were dismal, with sales far lower than expected, resulting in a significant evaporation of Apple's market value and a continuous decline in its stock price. Meanwhile, the strong rise of domestic Chinese brands such as Huawei has also put immense pressure on Apple. Even more concerning for Apple is the recent electronic device explosion incident in Lebanon, casting a shadow over its future prospects in the Chinese market.

I. Evaporation of Apple's Market Value: iPhone 16 Sales Fall Short of Expectations

In the first quarter of 2024, iPhone sales in the Chinese market dropped 19% year-on-year, plummeting further in the second quarter to fall out of the top five sales rankings. Pre-order numbers for the iPhone 16 series are even more worrisome, falling 12.7% compared to the iPhone 15 series last year. Analysts believe that the iPhone 16 Pro series failed to meet consumer expectations, leading to the decline in sales.

The failure of the iPhone 16 directly resulted in a loss of 500 billion yuan in Apple's market value in just one week. On September 16th, Apple's stock price closed down 2.78%, wiping out 665.7 billion yuan in market value. Cook attempted to increase profits by raising App revenue sharing in the Chinese market, but the results were not significant.

To recover from the slump, Apple has increased its cooperation with contract manufacturers like Foxconn and brought in new partners like Luxshare Precision. However, pre-order figures for the iPhone 16 remain unsatisfactory, and the decline in sales has also impacted the stock prices of contract manufacturers. Additionally, Apple's AI features launched in the Chinese market have yet to attract consumers, and it is expected to be formally launched in the Chinese market next year.

IDC data shows that in the second quarter of 2024, China's smartphone shipments grew 8.9% year-on-year, while Apple's shipments fell by 3.1%, its market share dropping to sixth. Apple's second-quarter financial report for 2024 also shows a 6.5% year-on-year decline in revenue from Greater China. To stimulate sales, Chinese retailers have already started discounting the iPhone 16 series, but the results have been insignificant.

As domestic Chinese smartphone brands rise, consumer interest in Apple smartphones is gradually waning, and Apple's dominance in the Chinese market is fading.

II. Rise of Domestic Mobile Brands: Innovation is Key

In stark contrast to Apple's slump, Huawei's newly released foldable phone has garnered huge market buzz with its unique design and innovations. The phone received 6.259 million pre-orders just ten days after its launch, and it is expected to officially sell 1 million units on September 20th. Huawei's strong return is bound to intensify competition in the smartphone market.

In contrast, Apple's iPhone 16 appears lackluster in terms of innovation. Since the iPhone 13, the iPhone's design has remained virtually unchanged, with only minor adjustments to the camera placement. While the iPhone 16 uses a faster 3nm chip, it lacks sufficient appeal to consumers.

Furthermore, the much-anticipated AI features have fallen short of expectations in the Chinese market. While the overseas version of the iPhone can use the powerful ChatGPT, the Chinese version employs domestic AI tools. Apple states that their AI features are currently in testing in the U.S., and it is expected to launch an English version suitable for the American market in December, while Chinese and other language versions will have to wait until 2025.

Due to information security concerns, ChatGPT is currently unavailable in mainland China. This means that even with AI features in the Chinese version of the iPhone 16, ChatGPT remains inaccessible, leading to disappointment among many domestic consumers.

Additionally, the iPhone 16's memory configuration has also been criticized. The starting 128GB version is priced at 5999 yuan, while upgrading to 256GB requires an additional 1000 yuan. This pricing strategy has left many consumers dissatisfied.

III. Impact of the Lebanon Incident: Information Security Draws Attention

The recent incident in Lebanon involving the explosion of pagers and walkie-talkies has raised concerns about electronic product safety. These explosions not only resulted in casualties but also forced people to ponder if the electronic products we use daily carry security risks.

After the Lebanon incident, Hezbollah accused Israel of being behind it and declared that they would retaliate. Israel has remained silent. Some analysts have suggested that these pagers may have been pre-installed with bombs and detonated remotely.

These pagers that exploded originated from Jin Apolo Company in Taiwan, but the company claims that the products were actually manufactured by a Hungarian company and have no connection to them.

On September 18th, another walkie-talkie explosion occurred in Lebanon, killing at least 20 people and injuring over 450. These walkie-talkies were manufactured by a Japanese company.

These explosions have not only had a significant impact on Hezbollah but have also severely disrupted the lives of Lebanese citizens. The United Nations has called for all parties to remain calm and avoid escalation. However, the Israeli army's tough stance has fueled concerns about the possibility of future incidents.

The Lebanon incident has triggered concerns about the security of Apple products. Some worry that Apple products also carry security risks, while others are concerned that Apple's components are sourced globally, potentially making them susceptible to bomb installation or backdoors. Reports indicate that 10% of Apple products are manufactured in India and sold in China, which could be even more worrisome.

In the current international climate, maintaining national security and information security is paramount. The Lebanon incident will undoubtedly have a negative impact on Apple's sales in the Chinese market, and Apple's future path is fraught with challenges.

Conclusion:

Apple faces pressure from multiple fronts in the Chinese market: increasingly fierce competition in the smartphone market, the rapid rise of domestic Chinese brands, declining consumer interest in Apple products, and the Lebanon incident casting a shadow over Apple.

To return to its peak, Apple needs to make changes in the following areas:

• Enhance innovation capabilities and launch products that truly attract consumers.

• Improve pricing strategies to provide consumers with a sense of value for money.

• Actively address information security issues and allay consumer concerns.

• Strengthen communication with the Chinese market and understand Chinese consumer needs.

The Chinese market is one of Apple's largest global markets and a strategic focus for its future. The ability to overcome its current challenges and regain its glory is of paramount importance to Apple.

Reference Sources:

• 2024-09-17 10:20 China Securities Journal: Apple's market value evaporates by over 6600 billion yuan, international gold price hits new highs

• 2024-08-03

10:11:35 Securities Times: iPhone sales are down! Apple phones fall out of China's top five sales rankings for the first time

• 2024-09-18

01:47 First Finance: Apple's market value evaporates nearly a billion dollars overnight, iPhone 16 series pre-orders fall short of expectations

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