Apple loses its spot as the world’s top seller of smartphones after tough China competition from brands like Xiaomi and Huawei

Just one quarter after taking first place in the global smartphone market, Apple is back in second. The iPhone maker delivered 50.1 million units in the first quarter of 2024, a 9.6% year-on-year drop, according to a report from research firm IDC. The fall puts Apple behind Korea’s Samsung, which sold 60.1 million units.

The troublesome market for Apple? China. Chinese consumers are turning away from Apple's latest iPhone and instead buying from local champions like Xiaomi and Huawei. “Increased competition in China is a big part of Apple’s decline in Q1,” Nabila Popal, a research director for IDC's worldwide tracker team, told Bloomberg.

Apple now has 17.3% of the global market. By comparison, Samsung has 20.8% market share; the Korean company's first-quarter shipments dropped by 0.7% year-on-year.

Three Chinese smartphone manufacturers—Xiaomi, Transsion, and OPPO—round out the top five. Together, the three firms shipped 94.5 million units with a combined market share of 32.7%. IDC estimated that Transsion, a budget-focused brand that’s found success in emerging markets, shipped 85% more phones this quarter than a year ago.

Apple’s decline comes even as the overall smartphone market recovers from a post-COVID slump. Smartphone sales rose 7.8% to reach 289.4 million units, according to IDC. “Smartphone recovery continues to move forward with market optimism slowly building among the top brands,” Ryan Reith, IDC's group vice president for worldwide mobility and consumer device trackers, said in a statement.

Apple’s China problems

Apple reported a 13% year-on-year drop in its sales in China, one of its most important non-U.S markets, in the quarter ending Dec. 31, 2023, even as global iPhone sales rose 6%.

Apple will report its next quarterly earnings, including China sales, in early May. But independent research reports that the company’s slump is extending into 2024. iPhone sales in China dropped by 24% in the first six weeks of the year compared to the same period a year earlier, according to a March report from Counterpoint Research.

China’s smartphone market is shrinking amid the country’s broader slump in consumer confidence. Counterpoint Research estimated earlier this year that overall phone shipments in China dropped by 7% in the first six weeks of the year.

Chinese consumers have been slow to embrace Apple’s new iPhone 15, with both Apple and third-party resellers offering discounts just a few months after the model’s release. “Consumers feel fine holding on to the older-generation iPhones for now,” Mengmeng Zhang, a senior analyst with Counterpoint, said at the time.

Apple is also facing regulatory scrutiny from the Chinese government. Last year, Beijing reportedly banned use of the iPhone by government officials as part of a wider drive for tech self-sufficiency. (Also in Beijing’s cross-hairs: Microsoft Windows and Intel processors).

Renewed China competition

Yet Apple also faces a more crowded Chinese market.

One major competitor is Huawei. The Chinese tech giant’s phone sales rose 64% in the first six weeks of 2024, according to Counterpoint. Huawei returned to the premium smartphone market last year with the Mate 60 Pro, a 5G smartphone featuring a homegrown processor.

Other brands, like Honor—born from Huawei’s decision to spin-off its budget smartphone division in the wake of U.S. sanctions—are also expanding market share as they expand into more expensive handhelds.

Xiaomi—the world’s third-largest seller of smartphones, according to IDC—is also entering a sector that Apple abandoned: Electric cars. Earlier this year, the Chinese smartphone maker launched its first EV, the SU7. The model racked up 120,000 orders in 36 hours, and Xiaomi is warning that the waitlist may extend to over half a year.

This story was originally featured on Fortune.com