Apple iPhone sales in China dropped 20 percent year-on-year in the fourth quarter of 2018, while sales for smartphones made by rival Huawei surged 23 percent, IDC report indicated on Monday.
The report is the first to put a firm number on the scale of a recent decline in Apple’s fortunes in the world’s second largest economy, after chief executive officer Tim Cook pointed to China as a big factor in a cut in the company’s quarterly sales forecast last month.
Apple no longer breaks out detailed numbers on iPhone shipments in its quarterly results, meaning that surveys and channel checks by the likes of IDC are often the clearest indicator of shifts in sales.
The figures in the report showed a 19.9 percent fall in Apple’s smartphone shipments in the final quarter of 2018, while Huawei’s grew 23.3 percent. That reduced Apple’s market share to 11.5 percent from 12.9 percent a year earlier, the report said.
“Besides regular performance upgrades in 2018 and small changes to the exterior, there has not been any major innovation that supports users to continue to change their phones at the greatly increased price,” the report said.
“The severe macro environment in China and the assault of domestic brands’ innovative products have also been reasons for Apple’s continued decline.”
A report from Hong Kong-based Counterpoint, earlier this month confirmed a similar sharp fall in sales in India – another big emerging market where Apple is struggling.
Counterpoint said iPhone sales in the fourth quarter, which includes India’s electronics sales-heavy Diwali festival, fell 25 percent on the year, reducing total sales in 2018 to 1.7 million units from 3.2 million a year earlier.
Chinese smartphone market contracted 9.7 percent in the quarter. Smartphone shipment of Xiaomi dropped almost 35 percent. Fifth-ranked Xiaomi ran afoul of inventory corrections and an internal restructuring, IDC said.
Apple was ranked fourth by shipments in China, trailing China’s Oppo and Vivo, the IDC report said.
“Apple doesn’t have a good go-to market strategy that fits the rapidly changing Chinese market,” said Nicole Peng, a senior director at Canalys. “It also seemed to be slow in reacting to China’s economic slowdown and changes in consumption structure.”
Revenue from the iPhone slid 15 percent in the October to December period. Apple is trying to replace phone sales with revenue from services.
Apple CEO Tim Cook has seen China as a key part of Apple’s strategy: last fiscal year the company generated almost $52 billion in revenue from Greater China, a region that includes Hong Kong, Bloomberg reports.
Apple said its sales fell 27 percent in the holiday quarter of 2018. The Chinese slowdown was the driving factor behind Apple’s first revenue outlook cut in almost two decades.
The industry is now counting on innovations such as foldable screens, 3D cameras and 5G-ready phones to revitalize the market. The argument is that consumers will get hooked once they experience first-hand phones with data speeds more than 10 times faster than today’s devices.
Lei Jun, Xiaomi’s co-founder, is expecting the advent of 5G to energize demand. But IDC argues blazing-fast phones won’t become the standard until 2020, because the rollout of 5G networks is just getting underway.
“The domestic smartphone market environment in 2019 doesn’t look very optimistic,” IDC senior analyst Wang Xi said in the report. “5G phones will only comprise a very small portion of the overall market. We’ve a long way to go before they become mainstream,” IDC said.