China’s new tastes will spit out more than Apple

Anta Sports Products

07/03/2024 24:00

(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
    By Sharon Lam
       TORONTO, March 6 (Reuters Breakingviews) - China is
losing its taste for Apple  AAPL.O . The $2.6 trillion U.S. tech
giant sold 24% fewer iPhones in the People’s Republic in the
first six weeks of 2024 compared to the year prior, data from
research firm Counterpoint shows. Domestic rival Huawei’s
sales rose by 64% over the same period. Apple and fellow
American competitors are squeezed by fiercely competitive
pricing amid what looks to be flagging demand. Chinese
consumers’ shifting attitudes suggest the woes will worsen.
    Boss Tim Cook is already fighting for what may be a
shrinking prize. Counterpoint’s research notes that various
brands have aggressively challenged Apple on price, while
overall economic data indicate Chinese consumer demand may be
weakening. Apple took the unusual move of offering discounts on
the iPhone in January. It resembles the travails faced by
electric automaker Tesla  TSLA.O , which has slashed prices in
China repeatedly only to watch domestic champion BYD  002594.SZ 
pull ahead.
    Compounding their troubles, however, is that China’s
shoppers are increasingly happy picking homegrown rivals. That
goes beyond cars and phones: Chinese apparel brands expanded
their market share by nearly 10 percentage points from 2013 to
2021, while the portion of consumers who prefer local over
global brands nearly doubled from 2016 to 2022, according to a
McKinsey report.
    It’s not just pinched wallets driving the shift. A survey
run by the consultancy shows that nearly half of Chinese
consumers believe domestic brands are of “better quality” than
foreign brands, compared to 23% who believe the reverse. Local
champions like Anta Sports Products  2020.HK  and Luckin Coffee
 LC0Ay.MU —which now counts more than double the number of
stores operated by U.S. rival Starbucks  SBUX.O  in the
country—are already household names. China's consumers will
eventually recover and reopen their wallets; their appetite for
American goods, though, may be slipping for good.
    Follow @sharonlam_ on X
    
    CONTEXT NEWS
Unit sales of technology giant Apple’s iPhone fell in China by
24% in the first six weeks of 2024 compared to the same period a
year prior, according to research firm Counterpoint. At the same
time, domestic rival Huawei grew sales volume by 64%.

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Graphic: China smartphone unit sales growth    https://reut.rs/3IqCmbK
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 (Editing by Jonathan Guilford and Aditya Sriwatsav)
 ((For previous columns by the author, Reuters customers can
click on  LAM/ 
sharon.lam@thomsonreuters.com; Reuters Messaging:
sharon.lam.thomsonreuters.com@reuters.net))