Apple loses its top rank in China due to a drop in smartphone sales.

For the first time in six years, Apple became the top-selling smartphone brand in China just three months ago. It has now slipped behind its Chinese competitors, having been hit harder than others by a sales dip in the first quarter.

 

Apple (AAPL) has slipped to third place, behind Chinese Android handset makers, according to two research surveys released this week.

 

The shift in market rankings occurs as China experiences a dramatic economic slowdown and as Covid regulations stifle consumer purchasing.

 

Smartphone sales in China plunged 14% in the first quarter, with quantities "similar to those witnessed during the severe pandemic-impacted Q1 2020," according to a research released on Thursday by Counterpoint Research.

According to Counterpoint Research, Apple's (AAPL) revenues fell 23% in the three months to March compared to the prior quarter. Last year, with the release of the iPhone 13, the firm saw fast growth in China.

In China, it now has a 17.9% market share, down from 21.7 percent in the fourth quarter of last year.

According to a Canalys survey released on Friday, Apple has dropped from first to third place in China, with first-quarter shipments down 36% from the previous quarter. Canalys analyses producer shipments to retail outlets rather than customer sales.

 

Apple's fall, according to Ivan Lam, senior analyst at Counterpoint Research, is due in part to China's economic recession, which has "hurt money in people's pockets."

Vivo, Honor, and Oppo, Chinese domestic brands, did better than Apple, with sales rebounding following the iPhone 13's outstanding performance in the fourth quarter of 2021, according to Lam.

In general, the market has been pulled down by seasonal demand and considerable economic uncertainties in the first few months of this year.

"I don't think Q2 statistics will improve much," Lam told CNN Business, "since continued lockdowns will continue to limit customers' desire to spend."

According to CNN's estimations, there are complete or partial lockdowns in place in at least 27 cities across China, affecting up to 165 million people. For more than a month, Shanghai, the country's most important financial centre and a key manufacturing powerhouse, has been under siege. Many enterprises have been forced to close as a result of the limitations, which has had a significant impact on economic activity.

In recent months, China's economy has slowed significantly. For the first time in almost a year, retail sales fell in March. Meanwhile, unemployment in 31 large cities reached a new high of 6%.

 

"These reasons, together with the negative demand trend already noticeable in China's smartphone market prior to the new pandemic wave, had a substantial influence on the industry," Mengmeng Zhang, a research analyst for Counterpoint Research, said in a study accompanying the data release.

 

Because of sluggish consumer mood and a dearth of fresh technologies to inspire customers, she expects China's smartphone demand to continue "underwhelming."

Apple is suffering in China due to more than simply a lack of demand. The corporation is also dealing with supply chain issues as a result of China's restrictions. Last month, Foxconn, an Apple supplier, paused operations at its Shenzhen facility for a few days due to a Covid shutdown enforced by the city. Pegatron, an iPhone manufacturer, also shut down its factory in Shanghai and Kunshan earlier this month.

During Apple earnings call on Thursday, CEO Tim Cook indicated that expanding Covid restrictions in China, as well as industry-wide silicon shortages, will have a $4 billion to $8 billion effect on the company's next quarter.

"In China, supply chain concerns remain a drag, and this will weigh on growth in the June quarter," said Dan Ives, an analyst with Wedbush Securities.

Canalys warned earlier this month that global smartphone suppliers face significant uncertainty as a result of China's rolling lockdowns, the Russia-Ukraine war, and the prospect of inflation.