The iPhone giant is currently facing its 5 biggest sales challenges in China.

• Renewed challenges are emerging for Apple in one of its most vital markets, which is China.
• Apple is facing a challenge from a rejuvenated Huawei due to cautious consumer sentiment and intense competition.
• High-end market challenges have been faced by Xiaomi and Oppo, as well as other domestic brands, who offer cheaper prices.

is facing renewed challenges in China, one of its most critical markets.

In the December quarter, the sales of the iPhone giant in the greater China region decreased by almost 13% to $20.8 billion.

In 2024, the company may face even more challenges due to cautious consumer sentiment and intense competition from a rejuvenated Huawei.

According to Will Wong, senior research manager at IDC, two significant obstacles hindered Apple's growth in 4Q23: a more conservative and practical spending attitude and the fierce competition from Huawei, which generated more excitement in the market than the new iPhone 15 series.

According to Wong, the iPhone's shipment growth in China is not expected to return to positive territory in 2024, with Huawei remaining the key competitor and more advanced technologies like AI and foldable grabbing more attention from consumers.

So what challenges does Apple face in the world’s second-largest economy?

Huawei comeback

The Mate 60, launched by Huawei last year, was equipped with 5G connectivity.

The U.S. government's sanctions against Huawei in 2019 and 2020, which cut the company off from the chips and technology needed for 5G, resulted in a major surprise to the world.

The sanctions, including restrictions on Huawei's access to Google software, severely hampered the Chinese technology giant's handset business.

In China's high-end smartphone market, Huawei, once the world's largest smartphone player, was the only significant competitor to Apple. However, when Huawei's phones lost their competitiveness due to the lack of 5G and no cutting-edge semiconductors, customers shifted their preferences towards iPhones.

With the Mate 60, Huawei is witnessing the initial indications of a resurgence.

Neil Shah, a partner at Counterpoint Research, stated that the revival of Huawei in the premium market is drawing back defectors who switched to Apple due to Huawei's inability to release a 5G smartphone over the past three years.

In the fourth quarter of 2023, Huawei regained its position among the top five smartphone manufacturers in China.

High-end competition

Other domestic brands such as Xiaomi and Oppo are also challenging Apple in the high-end market by offering cheaper prices.

"These high-end devices, priced competitively starting at 3,999 RMB ($563), offer features similar to those found in premium smartphones, putting pressure on Apple's older models and the base models of its new series," said Shah.

Cautious consumer

In 2024, the Chinese economy may face challenges similar to those seen in its property sector and weak consumer demand, which could negatively impact consumer confidence.

If the Chinese consumer remains weak, those cheaper high-end models could be attractive.

Josh Koren, founder at Musketeer Capital Partners, stated on CNBC's "Street Signs Europe" on Friday that he believes the consumer in China is economically affected and weary about their personal consumption, leading them to think, "I don't need to pay up for this phone when I can get a cheaper version of it."

Is Apple no longer cool?

In recent years, Apple's perception as a luxury brand among younger audiences in China may be shifting.

Koren stated that in his opinion, the Apple brand lacks its previous shine among Gen Z.

Although several rivals such as Samsung and Huawei have introduced foldable smartphones, Apple has remained steadfast in its resistance.

Apple hasn't yet marketed artificial intelligence features on their smartphones, like many other makers who are promoting this feature.

Apple's brand is suffering due to the question raised about their innovation in the smartphone industry, as suggested by Koren.

According to Koren, it will be challenging to make having the iPhone a necessity again until Apple innovates to restore its reputation.

Geopolitics

The constant threat of geopolitics looms over many foreign technology companies operating in China.

According to Bloomberg's sources, last year China issued an order to government agency and state-backed firm employees to stop using foreign devices, including iPhones, at work.