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Since launching the Mate 60 Pro series in August last year, Chinese technology giant Huawei has made a comeback in China’s smartphone market, beating out Apple. (AAPL) From that pedestal.
Huawei and other domestic smartphone makers have achieved double-digit growth this year, China’s smartphone shipments increase by 8.9% According to International Data Corporation, the second quarter was year-over-year.
China’s Vivo, Huawei, Oppo, Honor (a former subsidiary of Huawei), and Xiaomi each held the top share of China’s smartphone market. Meanwhile, Apple fell to 6th place. and despite Prices reduced for some iPhone models To compete, data shows Apple’s revenue fell 3.1% year over year.
Counterpoint Research said Apple’s iPhone shipments in China experienced a “slight decline” in the second quarter of this year, compared to the same period last year. Third largest number of shipments — only behind Oppo and Vivo — while Huawei was in sixth place.
Experts say a number of factors may be responsible for Apple’s decline in China. country’s sluggish economy Amidst a pandemic and global pandemic, changes in how citizens view their country in relation to the rest of the world. Growing number of sanctions imposed by the West.
Arthur Dong, a professor at Georgetown University’s McDonough School of Business, said, “There’s a growing sense of nationalism within China right now where people are buying local products and buying home team rather than buying American products.” told.
Huawei is the “national champion” of China’s economy
Since the time of Huawei, Placed on the US trade blacklist In 2019, the company under former President Donald Trump faced increasingly tough trade restrictions under President Joe Biden, particularly regarding the latest generation of semiconductors such as Nvidia. (NVDA)said Don.
Due to tighter trade restrictions on China and Huawei, the high-tech companies with ties to the Chinese government and which Dong called “national champions of the Chinese economy” are “now in a difficult position.”
“Huawei is currently scrambling to find alternative sources for these vital chips, as well as significant self-development efforts to replicate these technologies and manufacture the chips ourselves. “We’re working hard,” Dong said. “On this issue, China has a very difficult time replicating the chips that will power advances in AI because it doesn’t have access to the tools and machinery to build these chips, all of which are located within China. It is within the scope of US export regulations. ”
Dong said he doesn’t think the current situation will improve for Huawei. in another round Expected limitations In the coming months, he said, the “gap” that China and Huawei rely on to avoid sanctions “will close.”
Apple is no longer a status symbol
In the early 2010s, Apple was seen as the “legitimate, ultimate status symbol,” Andy Sai, a professor of business and analytics at Santa Clara University’s Leavey School of Business, told Quartz.
Tsai, who is also a visiting professor in Peking University’s MBA program, said his friends in China “ordered” iPhones for him because Apple products were harder to find in China and were in short supply. Now, See more Apple Store In the country.
“There was really no comparison, no competition,” said Tsai, who has visited China almost every year since 2006. “People still think Apple is a respectable, legitimate luxury product. But the difference is, they’re not fanboys or fangirls anymore.”
During a visit to China a few months ago, Tsai asked MBA students who are part of China’s professional class what they thought about the iPhone.
While students told him they were happy with their iPhones, he also said their next phone “won’t necessarily be an Apple” and that “there are some pretty good Chinese options.” Ta.
“We’ll buy the phone with the best price-to-benefit ratio,” the students told Tsai.
China’s deepening economic crisis and post-pandemic cultural changes
According to Dong, as of 2020, Huawei accounted for 18% of the global smartphone market. Two years later, that number had dropped to 2%, largely because Huawei was limited in the supply of needed chips and components, and he doesn’t think the company will recover anytime soon. said.
“We still face challenges in the Chinese market as China’s overall consumer economy is sluggish,” Dong said. “The main cause of Apple’s problems has to do with the fact that Chinese consumers cannot afford these kinds of phones because they are in hibernation and in a sense the whole economy is collapsing. .”
Huawei’s sales are growing “only because its phones are much cheaper than Apple’s phones,” Dong said. He added that if Huawei and other Chinese smartphone makers offer cheaper alternatives, consumers will seek them out.
Tsai said China is “more isolated” than it was during its superpower status in the 2010s, likely due to anti-China sentiment stemming from the pandemic.
Meanwhile, Western governments continue to bar China’s access to certain technologies, such as advanced semiconductor manufacturing equipment, as companies “seek to wean themselves from over-reliance on China.”
“When you combine all of this with the rise of domestic products, there’s a little bit of something to this trend, if locals can feel a little bit good about themselves by rooting for their home team,” Tsai said. Ta.
Huawei chip could ‘bark more and bite less’
Dong said there are two ways to look at the AI chips in Huawei’s smartphones.
“On the one hand, this could send a worrying signal that China has the capacity to manufacture its own chips,” Dong said. “But the other story is that when these chips have been examined and engineering analysis has been done, they don’t even come close to the performance of what Nvidia is making, and are actually several generations and years behind. .”
Despite Huawei’s “high-profile” announcements about developing its own chips, it’s hard to imagine how the company has managed to manufacture its advanced chips without access to critical machinery and components under trade restrictions. Dong said it was difficult.
“As far as this announcement that they have advanced-level chips, it’s probably just bark and not much bite,” Dong said.
Huawei and Apple’s competition goes beyond AI capabilities
Competition between Apple and Huawei in China is also about the difference in what Apple can offer to U.S. and Chinese consumers, Tsai said.
Tsai said Apple’s advantage in the U.S. is that it can control its ecosystem and offer a differentiated user experience. However, China has a “special situation” where Apple’s “version” of iOS is WeChat.
“We hardly need the tightly integrated walled garden of China’s Apple ecosystem to provide that experience, because it already exists within the world of WeChat,” Tsay said. he said. “This gives local carriers an advantage in that they can use Android, their own versions of Android, or an entirely new operating system, creating the self-contained ecosystem that Apple has worked so hard to create. There’s no need,’ because Tencent already created WeChat to do that. ”
The only difference between the two companies is Apple’s security and privacy features, Tsay said. “Of course, no one expects security or privacy when online in China,” he says.
