For Apple, 2018 couldn’t have ended sooner. The Cupertino-based tech giant has been humbled in the Asian powerhouse for quite some time, but the last quarter showed something else—Chinese consumers are getting disinterested with iPhones. Apple is losing big, and the company needs to step up.
The importance of Huawei overtaking Apple this quarter cannot be overstated,” Canalys analyst Ben Stanton noted. “It is the first time in seven years that Samsung and Apple have not held the top two positions.
It’s no longer news that the smartphone market in China is in a recession, as shipments declined for four straight quarters in 2018. State-run China Academy of Information and Communications Technology (CAICT) said smartphone shipments into China were down by 15% in 2018 and could go down even further in 2019.
One reason why the market for smartphones keeps contracting? Innovation. Chinese consumers have finally gotten the memo—there’s nothing the previous smartphone can’t handle, and for those who fancy a change, cheaper and fancy models from Huawei and Oppo seems to be enough to get by.
This line of reasoning saw Apple’s shipments into China fall by 20 percent in the Q4 of 2018. According to research firm Strategy Analytics, Apple shipped 10.9 million iPhones into China, down from 14 million shipped in last year’s final quarter. Apple shipped 34.2 million units in 2018 in comparison to 36.7 million shipped in total last year. Along with the dip in shipments, Apple lost more grounds in the market, seeing its share fall from 11.5 percent in 2017 to 10.1 percent. It’s now trailing Huawei, Oppo, and Vivo, in the Chinese market.
Apple is notorious for selling overpriced phones. It’s latest models are priced above $1,000. For the die-hard Apple user, there’s nothing they won’t do to get their hands on the latest models. But the average user has options—premium handsets at lower prices. While Apple’s market share of the Chinese market keeps shrinking with no end in sight, Chinese smartphone maker Huawei retains its crown as No.1 with a total shipment of 105.1 million smartphones in 2018 compared with Apple’s 34.2 million shipments.
Huawei’s meteoric rise is baffling despite the difficult 12 months the company experienced, including the arrest of the company’s CFO in Canada on allegations of bank fraud. The U.S. also advised its allies to block the company from selling its telecom hardware to business clients in their countries.
Linda Sui, Director at Strategy Analytics said:
Apple has been under pressure in China for the past three years. Ongoing patent battles with Qualcomm are a distraction, while Apple is heavily criticized for its high retail prices. Apple is in danger of pricing the iPhone out of China.
China is quite crucial for Apple. Last year, the company generated $52 billion in revenue from Greater China. Since then, revenue has dipped 15 percent, with Apple saying it could focus on growing its subscription services, whose growth was stronger than the iPhone’s. To combat decreasing iPhone demand, Apple has also approved price cuts for its most profitable product category. Authorized online vendors like JD.com have begun selling new iPhones at a 20 percent price cut , other vendors are expected to follow. While this measure is more of a short term solution, consumers will be expecting innovations such as foldable screens, 5G-ready phones, and 3D cameras to energize the smartphone market.
Apple plans to completely redesign the iPhone in 2020, the expected period when 5G will become the standard for data speed. In the meantime, 2019 iPhones would be laced with long distance 3D cameras. Apple is working with Sony to create 3D cameras that use ‘Time of Flight’ technology, allowing users to build detailed 3D models of any object close by.
Satoshi Yoshihara, head of Sony’s sensor division told Bloomberg:
Cameras revolutionized phones, and based on what I’ve seen, I have the same expectation for 3D [cameras].
The current iPhone XS sports a 3d front camera for facial unlocking, but these long-range cameras from Sony will offer much more. According to the reports, the camera should be able to detect and model objects up to five meters away.
“The most important thing in the coming year will be to get people excited.”
Apple has quietly filed a patent that explains how new iPhones will direct the user on when to take a photo and automatically open the camera. It works by detecting a user’s motion into the typical photography position, then it scans for an object close by, if both criteria are met, the camera will open.