Apple Reports Decline in China iPhone Sales Ahead of iPhone 17 Launch

Apple's iPhone Sales Decline in China Ahead of iPhone 17 Launch

Apple (NASDAQ: AAPL) reported a notable decline in its iPhone sales within China during the lead-up to the iPhone 17 launch. According to Counterpoint Research, sales in the first eight weeks of Q3 2025 slipped 6% year-over-year. This performance contrasts with a broader Chinese smartphone market decline of 2% over the same period, despite government subsidies aimed at stimulating consumption.

The Event in Detail: Intensified Competition in a Key Market

The 6% year-over-year drop in Apple's iPhone sales was deemed "unusually steep" for the period preceding a major product refresh. This decline meant Apple's market share in China stood at 12%, positioning it sixth among major players. This places Apple behind local competitors such as Vivo (19%), Huawei (16%), and Xiaomi (16%), illustrating the highly competitive nature of the Chinese market. Even as Apple CEO Tim Cook highlighted record iPhone usage and strong uptake for other Apple products in Greater China, the company's smartphone performance lagged.

Analysis of Market Reaction: Innovation Concerns and Local Momentum

The sales downturn is attributed to several factors. Analysts suggest the iPhone 17 failed to deliver major innovations, particularly in artificial intelligence, leading to an "awe-dropping" event that left some investors and consumers underwhelmed. This perception, coupled with numerous features having leaked beforehand, contributed to a lack of market surprise. The absence of Apple Intelligence in China for the iPhone 17 was noted, though Counterpoint analysts indicate that Chinese consumers prioritize "battery life and value over generative features."

Competitors have capitalized on this landscape. Huawei, for instance, has seen a resurgence, shipping 12.2 million units in Q2 2025 and capturing an 18% market share, powered by its HarmonyOS 5.0 and aggressive pricing, especially on high-end models. Xiaomi has also gained ground, partly due to the launch of its foldable phones, such as the Mi Mix Fold 3 and Mi Mix Fold 4, which represent product design innovation that Apple currently lacks. Moreover, Chinese government subsidies for smartphones priced under 6,000 yuan ($840) have disproportionately benefited local brands, as iPhone models typically sit above this threshold.

Following the iPhone 17 launch event, Apple's shares experienced initial dips, declining 1.5% and then 3.23% the subsequent day, reflecting investor skepticism regarding the product's immediate impact.

Broader Context and Implications: A Shifting Landscape

Apple's declining performance in China is part of a broader trend. Its market share has eroded significantly, dropping from 27% in 2021 to 20% in Q4 2023, and further to 13.80% for the first half of 2025. This trend is particularly significant given that the iPhone accounts for over half of Apple's total revenue. The company's valuation, trading above the 90th percentile of historical multiples, also suggests a stretched position for some analysts.

While some analysts, like Goldman Sachs' Michael Ng, maintain a "Buy" rating on AAPL with a $266.00 price target, citing "strong iPhone 17 demand signals from pre-order trends" and extended lead times in key regions, others are more cautious.

"I maintain a 'Strong Sell' rating on AAPL, citing limited upside, premium valuation, and recommend reallocating to more attractive or safer assets," states one Seeking Alpha analyst, emphasizing concerns over the lack of significant AI innovation and the competitive pressure from rivals.

Looking Ahead: Innovation and Market Share in Focus

The performance of the iPhone 17 in the coming quarters will be critical for Apple to halt its market share decline in China and reaffirm its position in the premium smartphone segment. The company faces the dual challenge of re-energizing its innovation pipeline, particularly in AI, and adapting its strategy to compete with agile local brands that benefit from government incentives and a strong understanding of local consumer preferences. Investors will closely watch upcoming earnings reports for insights into iPhone sales growth and Apple's strategic responses to the evolving competitive landscape in China and globally.