(Bloomberg) — Apple Inc.’s iPhone shipments fell a larger-than-expected 10% in the March quarter, reflecting weakening sales in China despite an overall recovery in the smartphone industry.
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According to preliminary figures from IDC, the company shipped 50.1 million iPhones in the first three months, falling short of Bloomberg’s average analyst estimate of 51.7 million units for the period.
The Cupertino, California-based company has struggled to maintain sales in the world’s largest smartphone market since launching its latest generation of iPhones in September. The resurgence of Huawei Technologies Co., more domestic competition and a Beijing ban on foreign devices in the workplace weighed on sales.
The slump is particularly pronounced given that the entire mobile communications market is recording its strongest growth in years. Smartphone makers shipped 289.4 million handsets in the period, up 7.8% from the low point a year ago when many manufacturers struggled with an oversupply of unsold devices. Samsung Electronics Co. reclaimed the top spot in the March quarter, while budget-focused brand Transsion increased shipments 85% and Xiaomi Corp. recovered and closed the gap to second-place Apple.
“The smartphone market is emerging stronger and changed from the turmoil of the last two years,” said Nabila Popal, research director at IDC. “While the two largest players both posted negative growth in the first quarter, Samsung appears to be in a stronger position overall than in recent quarters.”
Well-known Apple suppliers Hon Hai Precision Industry Co., Murata Manufacturing Co., LG Innotek Co. and TDK Corp. fell in early Asian trading on Monday amid a broader sell-off on fears of an escalation in conflict in the Middle East.
During the pandemic, Apple’s iPhone showed the most resilience as consumers pulled back from purchasing smartphones from most Android competitors. This inventory build-up led to aggressive prices from Chinese competitors like Xiaomi, who only exhausted their excess supply months later and are now starting to increase deliveries again. Huawei’s surprise return to prominence last year – with its own Chinese-made chip and HarmonyOS operating system on the Mate 60 series – has eroded Apple’s share of the premium Chinese market since August.
“Heightened competition in China is a big part of Apple’s decline in the first quarter,” Popal said. Elsewhere, several regions started the year with excess iPhone inventory after heavy shipments in the final months of 2023, it added.
Average selling prices for cell phones are rising as consumers increasingly choose premium models that they want to hold onto for longer, IDC researchers found. Apple, which consistently has the highest ASP in the industry, led the way as consumers showed a clear preference for its higher-end models. Still, the company has resorted to unusual discounts to boost sales this year, with some retail partners in China knocking up to $180 off the regular price.
In March, Apple opened a major new store in the center of the financial hub of Shanghai in the presence of Chief Executive Officer Tim Cook. China is home to the company’s largest retail network outside the U.S. and accounts for about a fifth of sales, which still come from the iPhone. However, many of the attendees who spoke to Bloomberg at the Shanghai store opening had purchased their iPhones more than two years ago. And while those Apple fans said they want to stay in the Apple ecosystem, some said they are also considering foldable device options from competitors or Huawei’s Mate 60 successor.
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– With support from Jessica Sui.
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