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author | geng chenfei

editor | song wanxin

"business is getting worse this year. the iphone sales off-season is usually in april and may, but this year the off-season has clearly come earlier, and prices have been falling since the beginning of the year." aholic, a mobile phone retailer in changsha, told 36kr, "second-hand iphones are selling better in our store."

apple's third-quarter financial report for fiscal year 2024 showed that apple's revenue in greater china was us$14.7 billion this quarter, a year-on-year decrease of 6.5%. it was the only market to decline among all geographic regions, and the decline exceeded expectations.

a more telling statistic is that a recent report from consumer intelligence research partners (cirp) shows that 17% of users who purchased iphones in the second quarter of this year switched from android, a five-year high and almost double the same period last year (10%).

image source: cirp

this further confirms the changes in apple's core users amid the price cut trend - loyal apple fans who pursue technological trends are partially transforming into low-end users who pursue cost-effectiveness.

01 losing apple fans?

at the beginning of 2024, apple began to significantly cut prices in the chinese market. taking the iphone 15 as an example, data shows that since march 1, 2024, apple's flagship iphone 15 pro max has offered a discount of up to us$160 on some e-commerce platforms in the chinese market.

during the 618 promotion this year, the price of the iphone 15 series on multiple e-commerce platforms such as tmall, jd.com, and pinduoduo further dropped, and the official price of the entire iphone 15 series dropped to the lowest price in history. compared with the launch price, the price reduction has exceeded 25%.

it's not just apple and e-commerce platforms that are competing. aholic told 36kr that his prices are 1,000 to 2,000 yuan lower than apple's official prices, and the profit of each new phone is only around 100 yuan.

driven by price cuts, according to media statistics, iphone shipments in china increased by about 12% in march after apple and its retailers held promotional season activities in greater china.

as the iphone's price drops, the people who buy it are also changing.

regarding the trend that 17% of users who purchased apple phones in the second quarter switched from the android system, cirp believes that the influx of android users may indicate that these new users tend to be more interested in new operating systems and competitive prices, and do not necessarily need apple's latest flagship models.

more importantly, the larger share of android users means that the share of existing iphone users who have traditionally driven huge sales for apple has declined.

apple's core base is a loyal user base accumulated over the years, and apple fans' pursuit of new products is an important driver of its sales.but the latest trend is that users who switch from the android camp due to price cuts and promotions tend to prefer high-priced models rather than new models.

"cost-effectiveness is a more important factor when changing phones. if there is a suitable android flagship phone, i might consider switching back to android," said a user who switched from android to ios.

an industry insider told 36kr that apple itself had no choice but to cut prices to maintain sales. the competition in the chinese mobile phone market is fierce, and consumer power has declined. the replacement frequency of high-end phones is relatively low. at the same time, huawei and other mobile phone brands are also rushing to high-end phones. in the case of insufficient updates by apple itself, its attractiveness to users is obviously reduced. therefore, for apple, starting with price is a more effective means.

the above-mentioned person added that the iphone price reduction is on the one hand to achieve the regional sales kpi, and on the other hand to ensure its profitability in the service revenue business.

"high-end users in the chinese market perform better in terms of paid subscriptions. this part of the 'apple tax' is very important to apple. even if the gross profit from hardware sales is not as good as before, the overall profit can be supplemented by service business revenue."

however, despite the improvement in market demand, it still cannot fundamentally reverse apple's decline in the chinese market. according to idc data, apple has disappeared from the top five domestic smartphone manufacturers in the second quarter of this year.

another proof of the iphone's declining appeal is that apple users are holding onto their devices longer and longer. cirp data shows that in the last 12 months, at least 71% of iphone users and 68% of mac users said their old devices were more than two years old, compared with 63% and 59% in 2020, respectively.

“if there is no epoch-making new breakthrough, i will not consider buying apple’s new models for the time being,” an iphone user told 36kr.

02 overseas failure

in fact, the iphone’s sales challenges are not limited to the chinese market; its “crisis” is also evident in some key overseas markets.

according to preliminary tracking data from market research firm idc, global iphone shipments in the first quarter of 2024 were 50.1 million units, down 9.6% from 55.4 million units in the same period last year.

further subdividing the regional market, europe performed particularly poorly. according to data from market research firm canalys, iphone shipments in europe were 7.3 million units in the first quarter of 2024, a year-on-year decrease of 17%. it was the only brand among the top five manufacturers whose shipments and market share both declined, with its market share falling from 27% in the same period last year to 22%.

the us market also showed a downward trend. cirp's report pointed out that the iphone's share of new activations in the us smartphone market dropped sharply to 33%, the lowest level in six years. this means that for every three new smartphones activated in the us, two are android.

image source: cirp

regarding the factors that led to the decline in activations of new iphones, cirp analysis believes that the main factors include rising smartphone prices, improved device durability, and the lack of revolutionary new features.

however, in india and southeast asia, a completely different picture is presented - although apple has a smaller share, it is growing rapidly.

according to a media report citing an insider, apple's revenue in india grew by about 33% in the 12 months ending in march this year from $6 billion a year earlier, with iphone accounting for more than half of sales. india has thus become one of apple's fastest growing markets.

"in india, the iphone's market share accounts for only about 2% of apple's sales of us$383 billion in the most recent fiscal year. the market share is not large, which is mainly affected by price acceptance. however, due to the large population base and rising income levels, in addition to the iphone se, sales of some mid-to-high-end models are also increasing." an analyst told 36kr.

the situation in southeast asia is similar to that in india. according to fortune, bryan ma, vice president of idc client device research, said that apple shipped nearly 10 million iphones to southeast asia last year. although it only accounted for less than 5% of global iphone shipments, iphone sales in the region still increased by 32%.

taking malaysia as an example, in february this year, apple’s shipments increased by 168% year-on-year to 86,000 units.

ivan lam, an analyst at counterpoint, believes that apple's brand image is regarded as a high-end brand in southeast asia and is widely recognized by consumers, occupying a favorable market position. as the consumption level in southeast asia increases, apple's sales strategy in southeast asia will be further strengthened.

03 a new cycle for the apple supply chain?

although the sales of iphone 15 are not good, judging from the trend of the apple chain in the secondary market, the market is generally trading on the expectation that ai will bring about a wave of phone replacement, and the next generation iphone 16 series, which will be equipped with ai functions, is highly anticipated. if compared with the two waves of iphonex in 2017 and airpods in 2019, the current market is similar to that in 2017.

in the market where ai technology and the mobile phone industry are deeply integrated, iphone will benefit more than android.

an industry insider said: "in the ai ​​layout, the development of android phone processors, large models, and even cloud servers will be more scattered, and the time to introduce these technologies will be longer. in addition, most android phones that support ai functions are currently concentrated in high-end models, with higher costs and a small user base, so their role in promoting sales is more difficult than that of apple."

jpmorgan chase previously pointed out that the ai ​​upgrade cycle is more likely to take a two-year "step-by-step" approach rather than a one-year "super cycle."

during this two-year ai upgrade cycle, apple's sales focus in the first year will be in north america, during which there will be enough time to resolve the eu issue; it is expected that the focus in the second year will be on the european and chinese markets.

morgan stanley predicts that apple could sell nearly 500 million iphones in the next two years, with shipments of 235 million in fiscal 2025 and 262 million in fiscal 2026.

in the apple supply chain, several core suppliers are the main targets of recent increases. for example, luxshare precision has seen its highest increase of over 50% since the end of april, and dongshan precision has seen an increase of over 90% within a month since early june.

from a fundamental perspective, luxshare precision's semi-annual report released recently showed overall solid performance. the company achieved operating income of 103.6 billion yuan in the first half of the year, exceeding 100 billion yuan for the first half of the year, an increase of 5.7% over the same period last year; net profit attributable to the parent company's owners was 5.4 billion yuan, an increase of 24% over the same period last year. the company expects net profit in the first three quarters to increase by 20% to 25% year-on-year.

some market voices point out that the apple supply chain market may see an upward cycle for two consecutive years, which will be manifested in a big year for the iphone (such as 2025) and a big year for wearable devices (such as 2026), and even include the launch of innovative products such as apple watch and the application of new technologies such as foldable screens.

according to media reports, apple has increased the stock of related models twice in the past month due to its optimism about the iphone 16. the total stock has reached 95 million units, 20% higher than the previous generation.

however, whether ai's role in driving the replacement trend is sustainable depends on the quality of apple's ai functions. duan yongping once made a comment in july this year, saying that it is certain that ai will bring about a wave of iphone replacement, but after the replacement, the replacement cycle will return to the original one.

it is not easy to win back the hearts of apple fans.