iPhone 8 Reverses Apple’s Decline in China

Apple has reversed its declining sales in China with the launch of the iPhone 8. According the market research firm Canalys, iPhone shipments in China grew by about 40 percent to 11 million units during the September quarter of 2017, up from 8 million units in Q3 2016. This marks the end of six consecutive quarters of slipping iPhone sales, and may pave the way for more App Store purchases and sales of secondary Apple products and services.

The iPhone 8 can be credited with Apple’s newfound growth in China, in part because its launch spurred Chinese vendors to lower their prices on earlier models in order to lure customers. Nevertheless, Canalys found that the iPhone 8 accounted for a higher proportion of iPhone shipments during the quarter, than the iPhone 7 did a year ago.

But Canalys analyst Mo Jia also observed that this trend is likely to be short-lived. “Apple’s growth this quarter is only temporary. The high sell-in caters to the pent-up demand of iPhone upgraders in the absence of the iPhone X. Price cuts on earlier models after announcing the iPhone 8 have also helped. However, Apple is unlikely to sustain this growth in Q4,” Jia wrote.

Reuters reports that Chinese vendors have already begun aggressively slashing prices on the iPhone 8 by as much as 20 percent ahead of the iPhone X launch on November 1. There’s a lot of excitement surrounding Apple’s tenth anniversary flagship smartphone. Apple reported last week that online pre-orders have been “off the charts” and that initial supplies of the iPhone X have already been exhausted. That being said, the newest iPhone’s prohibitively expensive price tag and low inventory due to manufacturing issues mean that it probably won’t drive sales growth to a similar extent during the fourth quarter.

“While the iPhone X launches this week, its pricing structure and supply are inhibiting. The iPhone X will enjoy a healthy grey market status, but its popularity is unlikely to help Apple in the short term,” Jia added.

On top of that, Apple faces stiff local competition and a number of regulatory issues in the increasingly saturated Chinese smartphone market, which maintains its position as the largest in the world despite the fact that it shrank 5 percent year-on-year during the September quarter. Phone makers like Huawei, Oppo, and Vivo still control the lion’s share of the market, accounting for a whopping 57 percent of device shipments.