Recently, Apple CEO Tim Cook's trip to China has been receiving continuous attention. In addition to celebrating the opening of Apple's largest store in China, Jing'an Store, on the afternoon of March 23, Cook suddenly appeared at Apple's Sanlitun store in Beijing to participate in the "Today at Apple: Anti Water Cold Mobile Game and Light Tracking" experience event held in the store that day, and had a heated discussion and exchange with members of the Anti Water Cold Mobile Game development team.
Faced with competition from domestic brands, Apple's sales in China have become increasingly heavy. At the same time, the news of Apple shifting its supply chain has also made the market uneasy. In the industry's view, the current position of the domestic supply chain is difficult to shake and is the cornerstone that Apple must strengthen. On the contrary, the enthusiasm of domestic consumers for Apple is declining, and the demand for Apple to consolidate its "position in the market" is becoming more urgent.
Emphasis on "fruit chain" enterprises
During his visit to China, Cook emphasized in a media interview the modernization level and efficient manufacturing capabilities of Chinese factories, highly praised the reliability and criticality of China's supply chain, and stated that this will be an important support for Apple's future sustainable development.
Perhaps to show his appreciation for domestic "fruit chain" enterprises, Cook met with three suppliers: BYD, Lansi Technology, and Changying Precision. BYD and Lansi Technology became suppliers to Apple as early as 2008 and 2006, respectively. Initially, BYD provided metal casing processing for Apple, while Lansi Technology produced glass protective screens for iPhones. Changying Precision became a member of the fruit chain in 2012 and currently provides key appearance parts for multiple product lines under Apple.
In recent years, there have been frequent reports of Apple shifting its supply chain. India, Vietnam, and other countries are increasingly involved in Apple product production. Just last year, when Cook visited India, he reiterated his commitment to increase investment, and India is actively building closer relationships with Apple, including providing financial incentives for its suppliers.
Public data shows that as of 2023, India's production of iPhones accounted for approximately 7% of global production, a three fold increase from the previous fiscal year. India's electronic product exports reached $24 billion, twice the amount in 2018.
Industry experts believe that it is unreasonable for Apple to downplay the Chinese market because it organizes its supply chain elsewhere. Industry observer Major General Ding pointed out that it is not difficult to observe the market, not only Apple, but also domestic brands such as Xiaomi and Vivo. In recent years, they have actively laid out in Vietnam, India and other places. As emerging markets, these regions provide new growth points for the sluggish mobile phone market. The proximity of consumer electronics production areas to markets is a general rule, which can save additional costs caused by transportation and tariffs.
At the same time, experts also mentioned that about 80% of Apple's manufacturing partners have branches in China for a long time. In terms of electronic product production, Chinese supply chain enterprises still have an irreplaceable position, and Cook's visit to China also has the significance of stabilizing military morale.
The Chinese market is the key to growth
Compared to the supply chain, the decline in Chinese consumers' enthusiasm for Apple may be a bigger problem. According to market research firm Counterpoint Research, iPhone domestic sales in the first six weeks of this year decreased by 24% year-on-year, ranking fourth among mobile phone brands.
In order to save sales, Apple frequently lowered prices last year, with iPhone 15 across the entire range being priced at over a thousand yuan. The starting price of iPhone 15 Standard Edition was lowered to below 5000 yuan, and it was also an official action of the Apple Store flagship store.
Apple's situation in China can be described as a dilemma. Canalys analysts stated in their research report that considering Apple's fierce competition from local brands such as Huawei and Xiaomi, the decline in sales in China is not surprising. However, Apple still has a strong brand appeal in China, and can achieve considerable revenue and profits through price reductions and promotions. However, this is a means for Apple to overdraw its brand image in a forced situation.
The data also confirms the effect of price reduction. According to IDC statistics, in 2023, iPhone accounted for 17.3% of the Chinese market share, ranking first in the mobile phone market. However, the report also pointed out that other domestic brands followed closely behind in market share, such as Honor with 17.1% share and OPPO with 16.7% share. Apple can no longer shake off its peers.
Despite the increasingly difficult steps, Apple still finds it difficult to abandon the Chinese market. The North American market is the cornerstone of its operations, while the European and Chinese markets are the key to its growth. As a high-end model, Apple finds it difficult to form a large audience in emerging markets such as Southeast Asia and the Middle East, and can only deepen its presence in the Chinese and European markets.
Industry observer General Ding believes that in the European market, Apple is facing greater pressure. Not only has its old rival Samsung been constantly competing with it, but Google Plexi has also taken a share. With the return of Motorola, Apple has another competitor. At the same time, the high-end achievements of domestic mobile phones have emerged, and their influence in the European market is gradually expanding.
Experts believe that the pressure on Apple in Europe is not weaker or even greater than in China. In a limited market, Apple is unavoidable and must confront latecomer companies head-on.
Is AI a new engine?
The market generally believes that AI is an important engine for Apple's next growth, but whether this can revitalize it in the Chinese market remains uncertain.
It is reported that Apple will release iOS 18 in June this year, which will add AI features. In recent years, the importance of iOS updates has even surpassed the release of new phones. The changes in the appearance of the phone are difficult to arouse consumer interest, and the upgrade of system functions will actually give people a deeper impression.
For example, Apple has launched multiple modes such as focus, sleep, mindfulness, and work on iOS 15, making the operation of the phone more synchronized with user life. On the other hand, iOS 16 has a lock screen wallpaper, iOS 17 has improved standby display, and on iOS 18, Apple is expected to comprehensively upgrade the Siri intelligent assistant based on a natural language model similar to ChatGPT. At the same time, the new version of Siri will also have autonomous content generation capabilities for the first time.
Nevertheless, it is not easy for iOS 18 to impress the market, as its peers have already launched multiple AI phones, with features such as generation, content organization, intelligent image cutout, and voice wake-up becoming standard features.
Among Chinese mobile phone manufacturers, Xiaomi, vivo, OPPO, and Rong Yao all submitted their transcripts last year. For example, vivo's Little V Assistant has an advantage in AIGC; OPPO holds the Andean model, and the Honor Magic model treats itself directly as a "GPT store", allowing it to be integrated with multiple large models. With just one Honor phone, you can experience the services provided by various large models.
Senior industrial economy observer Liang Zhenpeng believes that compared to the speed of AI phone launches, the more crucial issue for Apple is still the price. When all brands have AI functions, it is not possible to widen the gap. However, in terms of price, domestic brands are more attractive. For example, flagship new phones such as OPPO Find X7 and Vivo x 100 have a starting price of about 4000 yuan, while Apple's flagship model is close to 10000 yuan, which is already the price of folding screens for domestic brands. AI is undoubtedly the next selling point of Apple phones, but whether this can support Apple's high premium remains an unknown number at present.