Covid costs Apple in the Chinese iPhone market

Covid costs Apple in the Chinese iPhone market

  • In China, Apple could have lost between four and five percentage points of market share, according to analyst estimates.

In the last three months of 2021, Apple became the best-selling smartphone brand in China for the first time in six years. For the second quarter of this year, Apple iPhones made up of half of all smartphones sold in China, a feat that it maintained until the third quarter of this year. Between July and September 2022, Apple was the sole winner among China’s struggling smartphone vendors, as strong sales of the iPhone 14 drew a stark contrast to the weak performance of national brands.

Apple’s run to the top was impressive, but it was far from a smooth ride. In the first quarter of this year, just after topping China’s smartphone charts for the first time, Apple fell behind its Chinese rivals. Between January and March 2022, the tech giant suffered more than others from a drop in sales, and it seems that history could repeat itself in the last quarter of this year.

For a company whose smartphones have been mostly resilient to the global economic downturn, the unending outbreak of Covid-19 in China is finally hitting Apple, and hitting it hard. Just as Apple gears up for the holiday season, Foxconn, the world’s largest iPhone maker, is facing a Covid outbreak at its main Zhengzhou plant, a situation that could eventually affect production. The Taiwanese company also makes iPhones at a factory in Shenzhen, which, along with Zhengzhou, produces the majority of the world’s iPhones.

According to Foxconn’s statement to The New York Times, efforts to control the outbreak are “progressing steadily” and quarantined employees are provided with what they need, including “material supplies, psychological comfort, and responsive feedback.” Over the weekend, social media exploded with photos and videos of workers leaving the Zhengzhou plant.

Reports indicated they were seeking to escape hastily enacted Covid prevention measures that have left many of the 200,000 employees dealing with inadequate life conditions. On top of that, iPhone sales in China fell 27% in the week to Oct. 24, a third consecutive week of increasingly steep declines for Apple. Even adjusting for the device’s earlier launch this year, the negative trend continues and has been worse than recent declines by Android rivals, analysts at Jefferies, including Edison Lee, wrote in a note Sunday.

In the three months through September, iPhone sales in China rose 5.7% compared to a 15.2% drop for Android alternatives, Lee wrote. That changed last month, and Apple may have lost four to five percentage points of market share in the country, according to Lee’s estimates. “While the iPhone used to be the bright spot, it has gotten less bright and recent data points indicate a risk that it could become the worst spot,” Lee wrote. “This is an incremental negative trend for the smartphone market, but a particular concern for the iPhone supply chain.”

Analysts at Morgan Stanley believe there will be significant new developments as the fourth quarter is peak season for iPhone shipments. “The potential impact on iPhone production is worth monitoring, as Zhengzhou is one of Hon Hai’s major production sites, particularly for iPhone assembly.” Apple has also abandoned plans to ramp up production of its iPhone 14 family of products, according to a Bloomberg report last month.

Although the company reported better-than-expected results last Thursday, Apple itself has warned of a holiday slowdown. Now, the outage in Zhengzhou threatens to entangle the tech giant’s finely orchestrated supply chain, which could be a one-two punch for the company. which has seen demand weaken.

Leave a Comment