Apple's smartphone market share in China returns to the top 5! iPhone 16 is expected to usher in a new round of upgrade cycle

According to the latest information from Zhitong Finance and Economics APP, the iPhone sales in the Chinese market of the American consumer electronics giant Apple (AAPL.US) slightly decreased by 0.3% year-on-year in the third quarter. However, with Apple's rare multiple discount promotions for iPhone products and the launch of the new AI smartphone - iPhone 16 series, Apple has returned to the top five in smartphone market share in China. Previously, Apple unexpectedly dropped out of the top five in the second quarter. One of Apple's strongest competitors in the Chinese market, Huawei, saw a 42% increase in sales, reflecting the intensifying competition in the world's largest smartphone market.

On Friday, the latest statistics from market research firm IDC showed that Apple ranked second in China in the third quarter with a market share of 15.6%. However, compared to the same period last year, its share slightly decreased by 0.5 percentage points. One of its competitors, Huawei, ranked third with a market share of 15.3%, just below Apple, with a year-on-year increase of 4.2 percentage points.

Vivo, the largest supplier of low-cost smartphones in the Chinese market, holds a market share of 18.6% according to the latest market share statistics.

Last year, Huawei made a comeback in the high-end smartphone market with the Mate 60 series, which features 100% domestically developed smartphone chips, attracting many domestic consumers to this high-end model. This posed a challenge to the sales growth of Apple's iPhone 15 Pro and Pro Max flagship models last year. The company's latest model, Pura 70, released this year, continues to challenge Apple's long-standing dominance in the mid-to-high-end smartphone market in China.

Apple's return to the top five in the Chinese smartphone market, with the launch of the iPhone 16, is considered a significant catalyst. IDC's analysis team predicts that with the upcoming major promotional activities on various online sales platforms and the possible official launch of Apple Intelligence in the Chinese market, the demand for the iPhone 16 series in China is expected to gradually increase in the future.

According to the latest statistics from another market research firm, Counterpoint, the sales performance of the new iPhone series in the Chinese market exceeded expectations. In the first three weeks since its initial release in the Chinese market, the sales of the new iPhone series were 20% higher than the iPhone 15 series in the same period in 2023.

IDC stated in its report: "With the release of the annual new products, Apple has returned to the top five in the Chinese market with a market share of up to 15.6%." "Subsequently, with the increase in market promotional activities and the expected launch of Apple Intelligence, the demand for the iPhone 16 series in the future market is expected to gradually emerge."

Overall, according to IDC statistics, the sales of smartphones in China in the third quarter increased by 3.2% year-on-year, reaching 68.8 million units.

**Will iPhone 16 trigger a new "upgrade cycle" in the Chinese market?**

According to the latest research report from the well-known Wall Street investment firm Wedbush Securities, **the sales of the newly launched iPhone 16 series in China increased by 20% year-on-year in the first three weeks, marking a comprehensive revival of Apple's growth momentum. With the launch of the iPhone 16 leading the start of the artificial intelligence super cycle, Apple's iPhone sales in the Chinese market are expected to achieve a strong rebound in the next year.** Wedbush cited statistics indicating that especially the high-end iPhone 16 Pro and Pro Max models saw a 44% year-on-year increase compared to last year's iPhone 15.

Wedbush stated that Apple's introduction of the Apple Intelligence artificial intelligence feature is driving a new wave of large-scale upgrade cycles, ushering in a new era of iPhone growth, especially in this key market of China.

"We currently estimate that globally, there are approximately up to 300 million iPhones that have not been upgraded in over 4 years." "We believe that with the upcoming AI-driven iPhone upgrade cycle, Apple will be able to sell over 240 million new iPhone products in the 2025 fiscal year. We expect Apple smartphones to lead consumers in using and experiencing artificial intelligence." Wedbush stated in its latest report.

Renowned Apple supply chain analyst Ming-Chi Kuo recently revealed that **the recent order cuts by Apple are affecting the standard version of the iPhone 16, not the iPhone 16 Pro, as the latter has higher hardware configurations and is more popular among consumers.**

It is understood that under the heavyweight introduction of Apple's edge AI - Apple Intelligence technology framework, AI chatbots such as ChatGPT can be fully integrated with Apple's Siri voice assistant. This will allow Apple iOS system users to control all functions of a single application (App) using only voice, and to a large extent achieve comprehensive linkage and interaction of applications. Apple Intelligence can also efficiently assist iPhone users in work planning and efficiently address user queries through voice or text interaction. Siri's positioning may no longer be a clumsy formalized voice assistant, but rather a role similar to a "versatile AI companion."

Regarding when Apple Intelligence, eagerly anticipated by Chinese Apple fans, will arrive in the Chinese market, Apple CEO Tim Cook responded to this question during his recent visit to China. **He responded to the question of when Apple Intelligence will enter China by saying, "We are working hard to advance this. There is a very specific regulatory process behind this, and we need to complete this process. We also hope to bring it to Chinese consumers as soon as possible."**

At present, leading global smartphone hardware manufacturers are embracing breakthrough technology of AI large models, which are capable of running on the edge and accessing cloud computing resources, and are implanting them into the new generation of models to create the so-called "AI smartphones." Compared to general cloud-based AI large models that purely rely on cloud computing resources, edge-side local large models allow smartphone users to use products like ChatGPT more quickly, efficiently, conveniently, and securely. With edge-side AI, there is hope to achieve a more personalized "private AI assistant" that better meets users' individual needs, similar to the "all-powerful AI companion" in the movie "HER."

To enable the running of AI large models on smartphones, some smartphone hardware manufacturers are researching the integration of dedicated AI processors. These integrated NPU+GPU proprietary AI chips are designed for efficient processing of AI inference tasks, aiming to improve inference computing efficiency and energy consumption ratio. Manufacturers strive to combine cloud computing and edge computing, completing certain complex AI processing tasks in the cloud, while handling real-time or sensitive lightweight tasks locally. They also explore cutting-edge technologies such as model pruning, quantization, knowledge distillation, and lightweight architectures (such as MobileNet, TinyBERT, etc.) to reduce the actual scale and computational requirements of large models, making them suitable for powerful AI large models to run smoothly on application devices terminals with significantly limited training/inference computing resources like smartphones, PCs, etc.

Canalys released a research report showing that the organization expects 16% of global smartphone shipments to be AI smartphones in 2024. By 2028, the organization predicts that this proportion will exponentially increase to 54%. The compound annual growth rate (CAGR) of the AI smartphone market size from 2023 to 2028 is expected to be as high as 63%, mainly driven by consumers' strong demand for enhanced functions such as AI all-round assistants and edge-side automation processing. This transition is expected to first appear in high-end smartphone models, then gradually adopted by mid-range smartphones, reflecting the trend of edge-side generative AI as a more universal advanced technology penetrating the overall smartphone market.

Qualcomm CEO Cristiano Amon unveiled the new version of the company's Snapdragon processor this week, and in an interview, he stated that AI smartphones—smartphone terminals capable of running powerful artificial intelligence large models—are expected to become popular among every consumer globally within five years.

"In the next five years, it is very likely that all of us will have an AI-based smartphone," he said in a media interview on Tuesday. He emphasized that this issue will await continuously emerging application device-side AI use cases, similar to the historic shift that occurred as global users transitioned to smartphones