Apple's Q1 iPhone sales in China fall 19%: Report

Apple (AAPL) faces mounting challenges as, according to data from Counterpoint Research, iPhone sales fell over 19% year-over-year in China, marking its worst performance since the Covid pandemic in 2020. Part of the reason for this fall can be attributed to Huawei's return to prominence in the region.

Yahoo Finance's Akiko Fujita breaks down the report.

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This post was written by Nicholas Jacobino

Video Transcript

[AUDIO LOGO] MADISON MILLS: Big tech and focus is members of the so-called Magnificent Seven are set to start reporting quarterly results.Of course, kicking it off with Tesla.Then we've got Microsoft and Alphabet coming up on Thursday.Next week, we'll see Amazon and Apple.Two of the Magnificent Seven are in the red so far this year.Those are Tesla and Apple.Apple off around 13%.Under pressure from a lot of factors, including growing skepticism on Wall Street, legal battles, a canceled EV project, and increasing smartphone competition.More bad news on that front; counterpoint research revealing Apple's China iPhone sales dropped 19% in the first quarter.Here with more on this, we have Yahoo Finance's Akiko Fujita.Akiko.AKIKO FUJITA: Yeah, Maddie, this is the very risk that analysts have been flagging for some time.It's about the re-emergence of Huawei, the increased competition in the premium smartphone market in China, and then the impact that's likely to have on iPhone sales in the country.As you point out, Counterpoint Research pointing to a 19% drop for the tech giant in a quarter where smartphone sales actually showed continued growth in China.We saw about a 4.6% growth quarter-on-quarter there.So that points to a big concern for Apple in China, which is one of the most lucrative markets outside of North America.Take a look at the market breakdown coming through from Counterpoint Research here.Vivo and Honor domestic smartphone makers are maintaining the top two spots, but Huawei pointing to a 15.5% of the market when you look at growth from the same period last year.We're talking about near 70% growth in the quarter.And that is all due to the release of its premium smartphone Mate 60 Pro-- remember that release last fall surprise-- the market for its advanced features that were built on chips manufactured domestically.That was hailed as a big win against US export controls at least in Chinese state media.And Counterpoint Research is pointing to the release of that as the very reason why Apple's iPhone sales were hit in the country.Now, you combine that with geopolitical risks that have now emerged.Remember last fall, you had government agencies, as well as state-backed firms, banning iPhone usage among employees.And that points to a significant headwind for the country.As you rightly noted, shares of Apple down nearly 14% year-to-date.And no question, China is going to be a big question that comes up in the earnings call next week.Take a look at the regional breakdown for Apple, though, because that points to why we put so much attention on China.Greater China making up about 20%, nearly 21% of the revenue share for Apple.Now, what does this mean for the company moving forward?Well, you can follow where Tim Cook has gone with this over the last few months.Remember, last month, he was at the China Development Forum professing his love for the Chinese market at least publicly, saying he was happy to see the country opening up further to businesses.But just last week, he paid a most extensive visit that he has done so far to Southeast Asia, going to Singapore, going to Vietnam, as well as Indonesia, pointing to Apple looking to expand their manufacturing sites, as well as their market within Asia beyond China.You combine that with what they have been doing in India, and that points to the risk that Apple sees on the horizon.They're really trying to diversify beyond China, but China is still a significant market.That 19% drop, certainly not good news for the company.SEANA SMITH: Certainly very worrisome here for shareholders.Akiko, thanks so much.