Apple's Humiliation: iPhone Ranks 3rd in China, Stock Also Slips...

Stock Price Drops 4.04%
Largest Decline Since Last August

Apple, which had been the number one smartphone seller for years in China, one of its three major markets, fell to third place last year, causing its stock price to plunge 4%.

On the 16th (local time) at the New York Stock Exchange, Apple's stock closed at $228.26, down 4.04% from the previous trading day. This is the largest drop since August 5 last year (4.82%). The U.S. economic media CNBC reported, "Apple's stock price has fallen about 12% from its peak in December last year and has recorded the worst performance among the top seven tech stocks this year."

The sharp decline in Apple's stock price is due to Apple falling to third place last year behind Chinese companies Vivo and Huawei. According to market research firm Canalys, among the 284 million smartphones shipped in China last year, low-cost smartphone maker Vivo accounted for 17%, and Huawei, which offers high-end products, was second with 16%. Apple accounted for only 15%.

Apple's iPhone sales in China showed a decline throughout all four quarters last year. The annual sales decline was the largest ever. This is interpreted as a continuation of 'patriotic consumption' of Chinese smartphones amid ongoing U.S.-China tensions. The Chinese government has encouraged the use of domestic products by implementing measures such as restricting the use of foreign smartphones for public officials in 2023 and has supported domestic smartphone manufacturers to achieve technological self-reliance.

Another reason for the sluggish performance is that iPhones sold in China do not have artificial intelligence (AI) features installed. Apple unveiled the iPhone 16 last September, which supports the AI tool 'Apple Intelligence.' It supports AI assistant functions such as prioritizing important notifications and automatically summarizing call contents and emails. The problem is that it was not approved in China, which is seen as a factor that failed to incentivize the purchase of new iPhone models. According to U.S. market analysis firm IDC, while global smartphone shipments increased by 2.4% in the fourth quarter last year, Apple’s sales in China declined by 4.1% due to poor performance.

It was also bad news for Apple that its major supplier TSMC announced on the same day that smartphone sales in the first quarter are expected to decrease by 6% quarter-on-quarter due to seasonal factors. TSMC manufactures Apple's core chips such as the 'A series' used in iPhones and iPads.

Furthermore, TSMC revealed that AI chips accounted for more than half of its sales in the fourth quarter, raising concerns about Apple's sluggishness. This is estimated to be the point where revenue from producing chips for Nvidia’s graphics processing units (GPUs) and others has surpassed the revenue from smartphone chip production, which had been the largest portion of TSMC’s business.

According to CNBC, Ming-Chi Kuo, an Apple supply chain analyst, forecasted that Apple’s shipments will decrease by 6% annually in the first half of this year, with most of the shipment decline occurring in the second quarter. He evaluated, "There is no evidence that Apple Intelligence will accelerate hardware replacement cycles or provide profits to the service business."

Apple, known for being stingy with discounts, also appears to be making moves to promote sales through promotions. From the 4th to the 7th, Apple officially reduced the price of the iPhone 16 model by up to 500 yuan (about 100,000 KRW) through official sales channels in China. Discounts of 200 to 300 yuan were also applied to older iPhone models, MacBooks, iPads, and other product lines. Apple is scheduled to announce its fourth-quarter results for last year on the 30th.