Apple 
AAPL should be able to weather the recent setbacks in Greater China with ease. The iPhone maker lost ground to local rivals in a market that CEO Tim Cook calls “the most competitive in the world.” But significant advantages will help the $3 trillion company restore its resilience.
For four consecutive quarters, Apple’s sales in the region, which includes Hong Kong and Taiwan, have fallen year-on-year. And for the first time, domestic brands took all five top spots in quarterly smartphone shipments, according to market research firm Canalys. Apple’s share of a market that accounted for nearly a fifth of its net sales of around $380 billion in the last fiscal year fell from 16% to 14% over the same period in 2023.
The nagging fear is that this could be the beginning of an end, as experienced by many tech companies before Apple. Since Apple brought the iPhone to China in 2009, the company has navigated difficult political conditions, changing consumer preferences and strong competition from domestic imitators. Starbucks 
SBUXIn comparison, it was overtaken in both sales and number of stores by Luckin Coffee, a company that was closed after the scandal. 
LKNCY.
Apple’s problems are likely temporary, however. The recent surge in Huawei and other companies has been largely driven by aggressive promotions for China’s “6.18” online shopping festival. Apple has also cut prices on some older models by more than 20 percent. The discounts have been scaled back, according to Jefferies analysts, even as Vivo, Oppo and others continue to raise prices.
There are signs that Apple’s tactics are bearing fruit. Cook pointed out that, excluding the impact of the weak yuan and strong dollar, sales in Greater China have fallen less than 3 percent over the past three months, slower than in previous quarters. Monthly government data on foreign-brand phones also show that shipments rose more than 40 percent in May and 10 percent in June, a sign that iPhone sales are picking up again.
More importantly, Apple has excellent profitability in China, with operating profit margins in the region expected to exceed 40% this year, compared to the 31% expected companywide, according to forecasts from Visible Alpha. Xiaomi 
1810 is expected to reach only 4%.
All this bodes well for the upcoming launch of the iPhone 16 with new artificial intelligence features. Huawei, which made a comeback in the mobile phone market last year after US sanctions, plans to launch its latest flagship by the end of the year. However, even with financial support from Beijing, the company is struggling to develop enough cutting-edge chips in-house. Apple may lose the odd battle, but it is likely to win the war for Chinese smartphones.
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CONTEXT NEWS
Apple on August 1 reported revenue of about $86 billion for the quarter ended June 29, an increase of 5% over the previous year.
In China, Apple’s third-largest market, revenue fell 6.5% to less than $15 billion compared to the same period in 2023.
CEO Tim Cook said sales in Greater China fell less than three percent, excluding exchange rate effects, and the number of Apple devices in the region reached a record during the quarter.
To compete with cheaper competitors, Apple offered discounts of up to 2,300 yuan ($317) on selected iPhone models in China in May.
