Apple iPhone sales drop 19% in China as demand for Huawei smartphones soars, research says

Apple's iPhone sales dropped sharply in China in the first quarter of this year as the company saw strong competition from domestic brand Huawei, according to a new report from market research firm Counterpoint Research.

Apple saw sales of its iPhones fall 19.1% in the first three months of the year, Counterpoint's data showed, as Chinese telecommunications and consumer electronics giant Huawei saw a resurgence in its smartphone business.

The Shenzhen, China-based firm saw sales of its smartphones surge a whopping 69.7% in the first quarter, Counterpoint said.

This was thanks in no small part to the launch of Huawei's Mate 60 smartphone, which comes with a high-end chip that supports next-generation 5G mobile connectivity.

Starting in 2019, the U.S. slapped sanctions on Huawei in an effort to stop it from accessing such technology, nearly wiping out Huawei's smartphone business.

Now Huawei is staging a comeback. The company is the fourth-largest smartphone maker in China, according to Counterpoint's Tuesday research note, piling the pressure on Apple, which ranks as third-biggest.

Apple shares were slightly lower in U.S. premarket trading Tuesday.

"Apple's sales were subdued during the quarter as Huawei's comeback has directly impacted Apple in the premium segment," Ivan Lam, senior research analyst for Counterpoint Research, said in statement.

"Besides, the replacement demand for Apple has been slightly subdued compared to previous years."

Lam hinted that the iPhone maker could still see a recovery in China with the possibility of new color options for its flagship devices, aggressive discounts, and new AI features expected to be presented at its upcoming Worldwide Developers Conference (WWDC) in June.

Overall, smartphone sales in China grew 1.5% year-on-year in the first three months of the year, marking the second quarter of positive growth for the industry.

Counterpoint said it anticipates low single-digit year-on-year growth for China's smartphone market in 2024.

The firm suggested it expects AI features embedded into Chinese smartphone makers' handsets to drive renewed demand for new mobile phones.

Chinese device makers Xiaomi and Oppo have both integrated Qualcomm's Snapdragon 8 Gen 3 processor — which is designed for AI applications — in their latest flagship phones.

Huawei spinoff Honor, meanwhile, showed off an AI-powered eye-tracking feature in its latest flagship smartphone, the Magic 6 Pro, that allows a user to control a car using their eyes.

Chinese smartphone firms will likely start including new AI advancements in their mid-price phones in future, Counterpoint said.