One of the world’s biggest financial services providers has dealt a potential blow to Apple by claiming its era of dominating the Chinese smartphone sector is over.
In a note to investors published Monday, UBS analyst Steven Milunovich said, “We think it's doubtful China returns to its 2015 peak as local brands have caught up and upgrade cycles are lengthening.”
UBS also told its clients that the Chinese market was reaching a point of saturation, with smartphone users now taking longer than ever before to upgrade their handsets. This coincides with a study released earlier this month, which showed Chinese smartphone sales were down 27 percent in the first three months of this year.
The iPhone X, launched in November 2017, was Apple's most expensive smartphone to date.
In 2015, one in four smartphones sold in China were made by Apple. That market share has now decreased to 19 percent, with greater competition from local smartphone manufacturers weighing heavily on the US company’s presence in the country.
The UBS analyst said one of the major factors in the decline in Apple domination was down to Chinese manufacturers like Huawei establishing a foothold in the high-end smartphone market. Milunovich said, “at the peak in 2015, we believe Apple likely had 40-50 percent share with Tier 1 and 2 consumers; we think that figure is closer to 20-30 percent today.”
With the latest range of iPhones the most expensive ever released by Apple, the US tech giant is also struggling to compete in third and fourth-tier cities. The UBS notice pointed to Apple’s “weak distribution and old features at lower price points” when compared with the local competition.
Smartphone buyers in the low-end market have access to better services, more advanced features and lower prices when compared with what Apple has to offer.
While Apple may no longer be dominant in the Chinese market, it remains a huge player and its latest sales figures do not paint such a negative picture. The third and fourth quarters of 2017 saw consecutive revenue growth, with the last three months of the year giving the company “an all-time record for revenue” in the Chinese mainland, according to CEO Tim Cook.
Apple CEO Tim Cook continues to view China as one of his company's most important markets, despite its falling market share.
Apple reported in February that 2018 fiscal first-quarter revenue hit 17.9 billion US dollars in the Chinese mainland, Taiwan and Hong Kong, an 11 percent increase on the year before.
A separate report by Newzoo found that as of July last year, there were 243 million iPhone users in the Chinese mainland, making up a third of the 728 million handsets being used worldwide.