There are troubled waters under the Apple-China Bridge. After the company reported a decline in sales in the region, its shares fell 2.9%, wiping $84 billion off its market valuation. In response, CEO Tim Cook doubled down on Apple’s investment in China: He flew to Shanghai last week to be present at the opening of a flagship store in Shanghai and announced plans to launch Apple’s Vision Pro headphones in China by the end of the year.
It may take more than a new store to calm things down. Chinese consumers have shifted their love away from the iPhone to domestic smartphone makers, particularly Shenzhen-based Huawei, whose new line of high-quality Mate 60 smartphones has proven to be stiff competition. Now Apple faces declining sales in the region, its third-largest market, and antitrust actions from the United States and Europe add salt to the wound.
Dan Ives, senior equity analyst at Wedbush, said Fortune “It is ironic that Cook is in China while the antitrust issues are coming from both the US and the EU.”
“This is a critical time for Apple to take the olive branch from Beijing and not look back,” Ives said, adding that “China is critical to Apple” and that the company has struggled to grow there. True, according to a report from Counterpoint Research, Apple’s iPhone sales plummeted by 24% in the first six weeks of 2024. Over the same period, sales of its competitor Huawei increased by 64%.
Cook spent several days in China last week, in part to help open the new store, which is Apple’s 57th store in China and the second largest in the world after the one on Fifth Avenue in New York, but he also met with major suppliers, which, according to a Wedbush note, “was important considering concerns about a shift in the manufacturing supply chain from China to India, Vietnam and other countries” in the coming years.
Ives was confident: “This trip could start to change things in China after a turbulent year.”
Turbulent, indeed. Earlier this month, Apple was fined nearly $2 billion by the European Union for anticompetitive music streaming practices. Apple now faces antitrust actions in the US and Europe and is one of the first to be investigated by the European Union after passing the Digital Marketing Act, a law implemented in November 2022 that aims to dismantle monopolies and reduce anti-competitive behavior from part of some of them. the largest technology companies in the world.
In America, Apple is also at the center of an antitrust lawsuit, brought by the US Department of Justice, which claims that Apple’s control over app distribution and programming interfaces suppresses technologies such as cloud streaming games and of cross-platform messaging that might otherwise work just as well. on different smartphones. Apple has said it will defend the claims.
The new headwinds, in the form of legal investigations, add to the pressure Apple was already facing in China before. Its performance in the region – which accounts for about 20% of its sales, according to Wedbush’s note – has been declining for years. In part that’s because the United States and China have reduced their economic dependence on each other, as demonstrated by a 2019 Trump administration order barring U.S. tech companies from dealing with Huawei less than two weeks after the Chinese manufacturer of smartphones presented its brand Mate 60 Pro. phone.
In turn, China has invested in its own smartphone chips and components, while its consumers have used their purchasing power to show solidarity with the domestic smartphone maker. Huawei claimed the second-largest share of the country’s smartphone market at 17%, up from 9% last year, the New York Times reported.
To change that, Wedbush analysts said Apple “will need to turn this headwind into a tailwind toward the release of iPhone 16 this fall, and it all starts with reaffirming Apple’s presence in China.”