Apple Faces a Cold Winter in China: Declining Sales, Ineffective Promotions, Can AI Turn the Tide?

Apple Faces a Cold Winter in China: Declining Sales, Ineffective Promotions, Can AI Turn the Tide?Apple's performance in the Chinese market is facing unprecedented challenges. While the opening of its first Apple Store in Hefei, Anhui, is a notable event, it cannot overshadow the stark reality of continuously declining sales

Apple Faces a Cold Winter in China: Declining Sales, Ineffective Promotions, Can AI Turn the Tide?

Apple's performance in the Chinese market is facing unprecedented challenges. While the opening of its first Apple Store in Hefei, Anhui, is a notable event, it cannot overshadow the stark reality of continuously declining sales. Data released by market research firm Canalys reveals a 17% year-on-year drop in Apple's Chinese smartphone shipments in 2024, the largest decline among the top five vendors, with a staggering 25% plunge in the fourth quarter. This is a significant warning sign for Apple, which typically sees a sales peak in Q4 driven by new iPhone releases, suggesting a difficult period ahead in the Chinese market.

Offline Expansion Fails to Stem Declining Sales: Apple Store Expansion Doesn't Translate to Sales Growth

In recent years, Apple has maintained a pace of opening roughly one new Apple Store in China annually. From the Sanlitun store in Beijing in 2020 to the Jing'an store in Shanghai in 2024, the number of Apple Stores in mainland China has reached 58, second only to the US with 272 stores, making it the second largest globally. Apple Stores are crucial for maintaining brand image, with locations and designs meticulously chosen. However, even this expanding offline network has failed to halt Apple's decline in China.

While Apple maintained over 20% market share in China in 2022 and 2023, significantly outpacing competitors, Q4 2024 saw a 25% year-on-year drop in shipments despite retaining the top market share position. It was the only top-five vendor to experience a decline. Full-year shipments also fell by 17%, reducing market share from 19% to 15%. Canalys attributes this to "intensified competition from domestic vendors."

Apple's downturn in China is not a short-term phenomenon. Q1 2024 saw a 25% drop in shipments, the worst quarterly performance since 2020, placing them fifth in market share. Q2 saw them fall out of the top five entirely. Q3 witnessed a further 6% decline in shipments.

Five Consecutive Quarters of Revenue Decline: Promotions Fail to Reverse Trend

Declining sales have directly impacted Apple's revenue. Apple's Greater China revenue in fiscal Q4 2024 (calendar Q3 2024) fell by 0.34% year-on-year, while full-year revenue decreased by 7.73% to $66.95 billion. Greater China became Apple's only market with a year-on-year revenue decline, a trend that has persisted for five consecutive quarters.

To combat falling sales, Apple implemented unprecedented promotional measures. The iPhone 16 series, launched just four months prior, underwent multiple rounds of promotions. Apple's official Tmall flagship store offered 24-month interest-free installments for the first time, while during Double Eleven, all models received a RMB 500 discount. Combining this with trade-in programs, discounts reached up to RMB 1600. Early-year promotions offered discounts of up to RMB 800 on the iPhone 16 series.

However, even these frequent price cuts failed to stem the decline. Competitors like Huawei simultaneously launched large-scale promotional campaigns with even steeper discounts than Apple, further squeezing Apple's market space.

Government Subsidy Policy Exacerbates Challenges: RMB 6000 Price Limit Impacts Apple

In 2025, Apple faces a greater challenge: government subsidies. A notice from the National Development and Reform Commission and the Ministry of Finance offers a 15% subsidy on digital products, including smartphones, priced at RMB 6000 or less, limited to one item per person and a maximum subsidy of RMB 500 per item. The RMB 6000 price limit effectively excludes the iPhone 16 series (starting price RMB 5999) from the subsidy program, giving domestic manufacturers like Huawei and Xiaomi a significant competitive advantage.

Can AI Be a Lifeline? The Outlook Remains Uncertain

Faced with this challenging market situation, Apple is pinning its hopes on AI technology. Cook emphasized at the iPhone 16 launch that the new iPhone was built entirely around Apple Intelligence. Wedbush Securities, a prominent US investment bank, predicts that AI-related features will make the iPhone 16 Apple's most successful product ever. Analyst Dan Ives believes that approximately 300 million iPhones globally are over four years old, and demand from these users will drive iPhone 16 sales to 240 million units in 2025, creating a "super cycle" of upgrades.

However, whether AI can rescue Apple's Chinese sales remains highly questionable. Cook himself admits that it's unclear whether Apple Intelligence is driving iPhone 16 upgrade demand. TF International Securities analyst Ming-Chi Kuo's research shows that most iPhone users are not interested in AI, and Apple Intelligence has not generated a significant upgrade wave. He predicts that Apple will face severe challenges in 2025, with nearly stagnant iPhone shipments, continued shrinking of its China business, and no contribution from AI services.

More importantly, Apple Intelligence has yet to launch in the Chinese market, while domestic manufacturers such as Huawei, Xiaomi, Honor, Vivo, and OPPO have already fully integrated their AI large language models into their flagship phones.

Lack of Innovation May Be the Primary Cause of Sales Decline: What's Next for Apple?

For the past few years, Apple has faced criticism for a lack of innovation. Many believe that the decline in iPhone sales is a direct result of this. If Apple wants to reverse its fortunes in the Chinese market, relying solely on AI may be insufficient. Apple needs to re-evaluate its product and market strategies and explore more innovative solutions to regain momentum in the Chinese market. Apple's future in China remains full of challenges and uncertainty.