Apple reported a 2.25% decline in revenue for Greater China in Q1 2025, dropping to US$16 billion from US$16.37 billion in the same period last year.

This continues a downward trend, following an 8% sales drop for the fiscal year ending September 2024.

Increased competition from Xiaomi and Huawei, as well as trade tensions between the US and China, are contributing factors.

Analysts also point to Apple’s iPhone 16 models being excluded from a Chinese government subsidy program and the lack of AI features as reasons for the decline.

Apple faces additional challenges from US tariffs on Chinese imports, which will add around US$900 million to the company’s costs this quarter. To counter this, Apple plans to shift iPhone production for US sales to India.

🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ Government policies significantly reshaping the global smartphone landscape

China’s targeted subsidy programs are creating winners and losers in its domestic smartphone market, with the iPhone 16 notably excluded from government incentives that have helped boost local competitors.

This policy approach has contributed to China’s overall smartphone market growing 5% in Q1 2025, while Apple’s shipments declined 8% year-over-year to 9.2 million units 1.

Simultaneously, Trump’s tariffs are forcing a restructuring of Apple’s manufacturing strategy, with the company shifting iPhone production for the US market to India and other devices to Vietnam to avoid the cumulative 245% tariffs on Chinese imports 2.

The $900 million in additional costs Apple expects this quarter from tariffs represents just the beginning of what could become a much larger expense if the company doesn’t accelerate its supply chain diversification 3.

These dual pressures from both the US and Chinese governments mark a significant shift from Apple’s decades-long strategy of centralizing production in China, demonstrating how government policies can rapidly reshape even the most established global supply chains.

2️⃣ China’s smartphone competitive dynamics dramatically shifting toward local champions

Xiaomi’s remarkable 40% year-over-year growth in China illustrates how quickly market leadership can change, with the company reclaiming the top position at 19% market share while shipping 13.3 million units in Q1 2025 1.

This contrasts sharply with Apple’s continuous market share erosion, having fallen from shipping 51.8 million units in 2023 to 42.9 million in 2024 – a 17% decline that suggests structural rather than cyclical challenges 4.

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