Apple is slowly losing its grip over the world’s two biggest smartphone markets, China and India, thanks to pricey iPhones and competition from Chinese rivals.
The Cupertino, California-headquartered company has seen its market share decline over the last year in both countries. According to data released by International Data Corporation (IDC), Apple sold 11.8 million devices in China in the fourth quarter of 2018 as compared to 14.8 million units a year ago, losing 1.4 percentage point market share. Overall, iPhone shipments in China slid from 50 million in 2017 to 44 million in 2018, shows data collated by Counterpoint Research.
Greater China is Apple’s third-largest market in terms of revenue. In the fourth quarter of 2018 — after the Americas and Europe — China contributed USD 11.4 billion in revenues, according to company figures. However, the slump resulted in Apple’s revenue shrink here by 27%.
Meanwhile, in India, Apple's shipments declined to 1.7 million in 2018 from 3.2 million a year earlier, slashing its market share to 1.2% from 2.4%, as per Counterpoint Research. Apple’s chief executive Tim Cook had visited India in 2016 and spoke of the potential of the market, famously stating that Apple will be in India for a "thousand years". That was then. Now Apple has cut down its India revenue target by more than half to USD 1.8 billion this fiscal year, stated a Wall Street Journal report in December 2018.
China’s Xiaomi emerged as the biggest smartphone brand in India by capturing 28.9% market share in 2018, as per IDC. Samsung and Vivo grabbed the next two top positions with 22.4% and 10% shares respectively. In the premium category, data by Counterpoint Research puts OnePlus as a clear market leader with around 40% share.
Globally, Apple smartphone sales declined 15% due to the weak response in China. The company said macroeconomic and foreign exchange fluctuations, a reduction in subsidies and the battery replacement program (which led users to hold on to existing devices longer than before resulting in longer replacement cycles) contributed to the lower sales.
Apple's decline in Asia’s two largest economies, say analysts, comes down to its cost. As compared to Chinese smartphone players like Huawei, Oppo, Vivo and Xiaomi which provide feature-rich devices at affordable price points in China and India, Apple devices are quite expensive. iPhones cost two to three times the prices of its competitors in China, while in India they would be four times the cost of an average smartphone.
iPhones are "just too expensive," Kiranjeet Kaur of IDC told CNBC recently. "At what iPhones used to sell at earlier, there's like lots of competition coming in ... especially from Huawei."
Tarun Pathak, associate director with Counterpoint Research said, “Apple operates very differently in both these markets but there was one common reason for the decline — the impact of competition from rival Android camp in the premium segment.”
“In China, Apple faces tough competition from Huawei, while in India, it was OnePlus which impacted sales,” he said. “Another reason was overall holding period of smartphones increasing in China which impacted new iPhone sales. In India, even though the holding period wasn’t really accountable, it was the steep pricing of new iPhones which further impacted sales.”
Last month, Apple announced that it would cut prices of some of its flagship devices by selling them at local currencies in some countries instead of US dollar. Cook said in a recent interview that it was being done in order to relieve consumers’ anxiety about the high price of iPhone.
Following the announcement, several Chinese e-commerce platforms including Suning, JD and Tmall slashed the price of Apple devices. According to Suning, the prices of new products launched in 2018 have already come down to the 2017 levels.
Analysts expect iPhone sales in China to decline further partly due to the ongoing US-China trade war and Chinese companies encouraging employees to buy smartphones from Chinese OEMs (original equipment manufacturers).
Amidst the dropping profits in smartphone business, Apple is leaning on services such as Appstore, Apple Pay, iCloud, AppleCare and Apple Music on 1.4 billion active devices across the world to drive growth. The company is looking to expand its services revenue to USD 14 billion by 2020. During the Q4 earnings call, the company said it would also focus on video content creation. Earlier this month, a CNBC report said Apple plans to offer subscriptions to streaming services from networks like Starz, CBS and Showtime through its built-in TV app on iPhones, iPads and the Apple TV.
Apart from services and video content, Apple is targeting wearables, home and accessories, which grew a strong 33% in Q4 2018, as well as self-driving cars, retail and health. Maurice Klaehne, a research analyst at Counterpoint Research, said in a blog post that Apple may enter the health and wellness space in the future.
“While nothing was indicated directly on the Q4 earnings call, there were several qualitative comments made that might hint at some more developments coming our way,” he said, adding Apple and Aetna have already announced a new app called Attain that rewards healthy behaviour through incentives such as a new Apple Watch.
(With inputs from Carl Zhou, intern with The Passage)