Apple priced the iPhone out of the Chinese smartphone market: How consumers reacted

But the price cuts come after a major slump in China's smartphone market last year. Smartphone shipments hit 285.8 million in 2022, down 13.2% year-on-year to below the 300 million mark for the first time in ten years, according to IDC. Apple iPhone shipments fell more than 4% year-on-year in China in 2022, IDC said.

Market research firm IDC expects the Chinese smartphone market to contract by 13% this year, falling below 300 million device shipments for the first time since 2012. That could be one reason Apple has not changed its iPhone pricing in China.

Apple priced the iPhone out of the Chinese smartphone market

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Apple held a 70% market share in the $600-plus smartphone segment in China in the second quarter, up from 58% in the first quarter, IDC said. Much of that can be attributed to the demise of Huawei, whose smartphone business has been hit by U.S. sanctions, leaving a gap for Apple to fill.

Disappointing results in China (beyond the initial months of the price drop) would mean Apple will continue to face pressure on its global iPhone revenues, with few obvious sources of growth. In particular, India, one of the markets with highest growth potential for smartphones, will likely not come to the rescue, as the demand for premium smartphones at current prices is relatively small. Apple also faces strong competition from relative newcomers Oppo and Vivo. Notably, Oppo surpassed Apple as the most used smartphone brand across all of Asia. Growth in India will not be enough to counter weak demand in China. As always, we will be monitoring the situation. Looking to do the same? Look no further than our Global Smartphone and Tablet Tracker.

But Apple's impressive China share is due to drop over the coming year, analysts believe. Chinese Android-based smartphone brands from companies like Huawei and Xiaomi will take back some of the market by selling for less, they say. Chinese mobile carriers are also cutting subsidies for handset vendors as the overall smartphone market slows down on declining interest in new devices overall, industry analysts believe.

The smartphone market in China in Q4 2021 closed with 86.6 million units shipped, a slight year-on-year growth of 3%. For the full year, 2021 saw nearly 333 million units shipped, a year-on-year increase of 1%, still more than 10% below the pre-COVID-19 level in 2019.

Xiaomi is close to meeting its target of selling 60 million phones in 2014 with a business model well suited to expansion into other developing economies. In a classical reaction to disruptive innovation, the largest smartphone manufacturers were at first not motivated to seriously challenge Xiaomi, since they could not be profitable at the price these customers are able to pay. Now that Xiaomi is becoming a significant competitor, the incumbents are still barely reacting, launching simplified versions of their mature flagship products, as Apple did with the iPhone 5c. But these are perceived as outdated, as newer models, like the iPhone 6, are introduced amid great fanfare in wealthier markets, and often end up being discontinued.

So far from being a copycat, Xiaomi presents a knotty disruptive challenge to the largest smartphone manufacturers. As it continues to expand in developing economies by marketing to the emerging middle class, it remains sheltered from the competition by its margins and the way it makes products profitable. Sooner rather than later, as it continues to propagate its new business model, this disruptive competitor is going to change how this industry works.

The global market is in decline and analysts have been predicting difficult times for the smartphone market specifically. China is a huge market for Apple, and the company faces fierce competition from a variety of Android vendors.

The cost of making an iPhone 13 Pro, Apple's latest iPhone, is $570. Components to make a phone include the screen, the phone casing, the camera, the battery, software, chips, and more. Apple charges a sizable markup on its phones."}},"@type": "Question","name": "How Much Revenue Does Apple Make in a Year?","acceptedAnswer": "@type": "Answer","text": "In 2020, Apple's revenue was $274.3 billion. In 2021, its revenue was $365.8 billion, an increase of 33.3%.","@type": "Question","name": "How Much Does a Samsung Galaxy S Phone Cost to Make?","acceptedAnswer": "@type": "Answer","text": "The Samsung Galaxy S21 costs approximately $508 to make. It retails for approximately $1,049.","@type": "Question","name": "In Which Country Are iPhones the Most Expensive, and Cheapest?","acceptedAnswer": "@type": "Answer","text": "Turkey has the highest price for an iPhone 14, followed by Brazil and Sweden, according to industry reports. The least expensive place is the U.S., followed by Japan and South Korea."]}]}] EducationGeneralDictionaryEconomicsCorporate FinanceRoth IRAStocksMutual FundsETFs401(k)Investing/TradingInvesting EssentialsFundamental AnalysisPortfolio ManagementTrading EssentialsTechnical AnalysisRisk ManagementNewsCompany NewsMarkets NewsCryptocurrency NewsPersonal Finance NewsEconomic NewsGovernment NewsSimulatorYour MoneyPersonal FinanceWealth ManagementBudgeting/SavingBankingCredit CardsHome OwnershipRetirement PlanningTaxesInsuranceReviews & RatingsBest Online BrokersBest Savings AccountsBest Home WarrantiesBest Credit CardsBest Personal LoansBest Student LoansBest Life InsuranceBest Auto InsuranceAdvisorsYour PracticePractice ManagementFinancial Advisor CareersInvestopedia 100Wealth ManagementPortfolio ConstructionFinancial PlanningAcademyPopular CoursesInvesting for BeginnersBecome a Day TraderTrading for BeginnersTechnical AnalysisCourses by TopicAll CoursesTrading CoursesInvesting CoursesFinancial Professional CoursesSubmitTable of ContentsExpandTable of ContentsiPhone CostLabor CostsLabor ConditionsFAQsThe Bottom LineFundamental AnalysisToolsThe Cost of Making an iPhoneByRachel Brown Full BioRachel Brown has 11+ years of experience managing fundraising campaigns and 7+ years writing various content from lifestyle to finance.Learn about our editorial policiesUpdated December 27, 2022Reviewed byThomas Brock Reviewed byThomas BrockFull BioThomas J. Brock is a CFA and CPA with more than 20 years of experience in various areas including investing, insurance portfolio management, finance and accounting, personal investment and financial planning advice, and development of educational materials about life insurance and annuities.Learn about our Financial Review BoardApple (AAPL) is one of the most popular companies in the world and produces one of the most ubiquitous smartphones. Apple has one of the most sought after products in the world, and as of the end of 2022, Apple was first in market share for smartphones, often trading places for the number one spot with Samsung.

A repository of quarterly data for the China smartphone market. This data is a part of a series of reports which track the mobile handset market: Smartphone and Feature Phone shipments every quarter for more than 140 brands covering more than 95% of the total device shipments in the industry.

Despite this decline, Apple saw its market share in China increase by about 1% year over year. In 2021 it was at about 21% market share and is at 22% market share in 2022. This is due to the Chinese smartphone market seeing demand decreased by 18% overall year over year.

Apple-rival Samsung already identifies India as a key global manufacturing hub and has set up one of its largest factories in the country. Chinese smartphone maker Xiaomi, which currently leads the market, as well as its rivals Oppo, Vivo and OnePlus also locally assemble a number of their handsets in the country.

North America, mature Asia/Pacific and Greater China recorded the worst declines of all regions, at 6.8%, 3.4% and 3%, respectively. Those mature markets rely more on flagship smartphone sales than any others and therefore were more dramatically affected by the sales drop.

Still, Apple clung to second place among smartphone makers with 15.8% of market share. In the same quarter, Samsung led with 17.3% of the market, with Huawei third with 14.8%. But Huawei was first in growth, with sales rising 37.6% to more than 60 million smartphones, according to Gartner.

"Huawei also exploited growth opportunities through continued expansion of the Honor series in the second half of 2018, especially in emerging markets, which helped Huawei grow its market share to 13% in 2018," Gupta said in a statement. Honor series smartphones start at $199; even the flagship Honor 10 series smartphone retails for about $468 compared with the iPhone XR, which goes for $749.

Of the top five smartphone makers, OPPO and Xiami came in a distant fourth and fifth place in market share, with 7.7% and 6.8%, respectively. All other manufacturers made up the remaining 39% of the market share.

"Although Samsung is strengthening its smartphone offering at the mid-tier, it continues to face growing competition from Chinese brands that are expanding into more markets. It also faces difficulty bringing significant innovation to high-end smartphones," Gupta said. "Samsung introduced new mid-tier-focused M series smartphones in the first quarter of 2019 to compete with aggressive Chinese manufacturers in emerging markets, and to expand into the online sales channel."

"However, in other regions where the subsidized device is non-existent, it's possible if not likely the device retention period could be lengthening, as it may be in the consumer market, with similar impacts on sales," said Bill Menezes, a principal analyst at Gartner. "If the slowdown in sales is attributable to smartphone ownership behavior by consumers, this could see an increasing impact from the corporate side as this trend continues. 2ff7e9595c