Apple Posts China Sales Decline, Ramping Pressure On AI Strategy

Apple’s sales in China declined by less than 1 percent in its fiscal fourth quarter ending on 28 September, missing analysts’ expectations, as the company negotiates with officials to launch artificial intelligence (AI) features in the country.

The company’s total revenue grew 6.1 percent year-on-year to $94.9 billion (£73bn) for the quarter, with total iPhone sales growing 5.5 percent to $46.2bn, a record for the September quarter, according to Apple’s earnings statement. e But its sales for the Greater China area, including mainland China, Hong Kong, Macau and Taiwan, fell to $15.03bn from $15.08bn a year earlier.

Revenue for the region for the full year ended 28 September also fell 7.7 percent to $66.95bn.

China challenges

China is the world’s biggest smartphone market and Apple faces increased competition with the revival of US-sanctioned Huawei Technologies, which has been challenging the firm with popular flagship launches since last year.

Apple returned to the top five Chinese smartphone sellers in the third calendar quarter in the No. 2 spot, IDC said in October.

The research group found that initial sales of the iPhone 16 were “on par” with those of its predecessor in China and noted that Apple was relying on promotions and the upcoming launch of Apple Intelligence, the company’s take on AI, to drive further demand.

The figures from IDC and Apple itself indicate how the company is pinning its sales hopes on the iPhone 16 range, which launched only days before the end of the quarter, and particularly on AI, a technology that has not yet been cleared for launch in mainland China.

Apple is currently selling the new handsets in China without AI features, which became available last week in US English only and are set to roll out in some other languages and regions in December.

AI hurdles

The company says it will begin offering AI in Chinese in April, but there is no guarantee the features will be available to users in mainland China, which has strict controls on AI technologies.

The features run largely on the device, increasing security and privacy, Apple says.

They will only run on newer iPhones, which is expected to drive handset upgrades.

Chief executive Tim Cook arrived in China last week, his second visit to the country this year, and reportedly met with Minister of Industry and Information Technology Jin Zhuanglong as well as the heads of some local companies, including China Mobile and Weibo.

He told a meeting with the Chinese government in Beijing that Apple would increase investment in China, contributing to supply chain development, according to a statement from Tsinghua University.