---
title: "Apple (AAPL) Scrambles to Regain Chinese Market Share as Trade War Intensifies"
description: "Apple (AAPL) Scrambles to Regain Chinese Market Share as Trade War Intensifies"
type: "news"
locale: "en"
url: "https://longbridge.com/en/news/239524296.md"
published_at: "2025-05-09T09:25:08.000Z"
---

# Apple (AAPL) Scrambles to Regain Chinese Market Share as Trade War Intensifies

Global tech giant Apple Inc. (AAPL), long dominant in the smartphone and personal computing markets, is now grappling with significant headwinds in China that will likely weigh on growth in the near term. As anticipated, the company is beginning to address these issues, driven by the absence of a foldable smartphone offering and underwhelming AI capabilities.

While Apple has not officially confirmed a foldable device, Bloomberg reports suggest it is close to rolling out its Apple Intelligence AI suite in China, following delays since last October. Though this marks progress, I remain neutral on the stock, as I believe the current valuation fairly reflects the company’s fundamentals, offering limited upside and little margin of safety.

## **Apple’s Failure to Launch a Foldable Smartphone is Hurting Sales**

My concerns regarding Apple’s continued growth stem from its poor recent performance in China, one of the company’s most important target markets, hauling in 17% of revenue in the previous financial year. Most recently, Apple’s China revenue fell 8% YoY, and in Q2 FY2025, China revenue declined over 2%, suggesting that struggles are continuing in the new financial year as well. A closer study of Apple’s performance in China reveals that the failure to launch a foldable smartphone in China has cost the company market share.

According to Canalys data, Apple’s China smartphone shipments were 42.9 million in 2024, a notable 17% YoY decline. As a result, the company’s market share fell to 15%, behind Vivo and Huawei. Interestingly, both Vivo and Huawei reported strong shipment growth in 2024 (11% and 37%, respectively), which reveals Apple’s struggles are isolated.

Interestingly, while total smartphone shipments in China grew just 4% in 2024, foldable smartphone shipments grew 27% YoY, confirming the tailwinds supporting this niche market segment. With a market share of almost 50% in the foldable smartphone segment, Huawei led the way in 2024 (four of the five best-selling foldable smartphones in 2024 were Huawei models).

Although there are rumors of a foldable iPhone, Apple has yet to confirm them. As long as the company fails to cater to the surging demand for foldable smartphones in China, Apple is unlikely to reverse market share losses in the foreseeable future.

## **Slow AI Progress for Apple as Competition Heats Up**

Another factor that has kept me cautious on Apple recently is the lackluster progress the company has made with AI. In China, the lack of AI features has led to dissatisfied customers. A survey conducted by Canalys found that Chinese consumers had the strongest AI inclination among the top three smartphone markets in the world (China, the U.S., and India). Data revealed that 43% of Chinese consumers have a high AI inclination, compared to just 15% in the U.S. Although Apple’s AI deficit may not harm U.S. sales, applying the same playbook to China has already proven to be costly.

Encouragingly, Apple is inching closer to unveiling Apple Intelligence in China, which is expected to be rolled out as part of the iOS 18.6 release. The U.S. tech giant is reportedly partnering with Chinese AI giants Alibaba Group Holding (BABA) and Baidu, Inc. (BIDU) to bring AI features to Chinese consumers.

China does not currently allow the integration of ChatGPT and Gemini into smartphones due to perceived national security threats. Partnering with domestic AI leaders is the best way for Apple to gain traction in China as an AI-friendly smartphone manufacturer. Samsung has already seen success with this strategy after partnering with Baidu to power Galaxy AI and bring AI features to Chinese consumers.

Although Apple’s recent progress marks a step in the right direction, the company is not yet out of the woods. Apple Intelligence is not equipped with the same powerful AI features introduced by Samsung and Huawei, so the company has much catching up to do. In key functionalities such as advanced image editing, real-time call translation, and AI-powered searches, Samsung is clearly ahead of Apple. This disadvantaged competitive position may prevent Apple from registering a rebound in iPhone sales in China even after the rollout of AI features.

## **Delving into Apple’s Valuation**

From a valuation perspective, at a forward P/E of 27.63 compared to the five-year average of 27.42, I believe Apple is reasonably valued, leaving insufficient margin of safety to bet on the tech giant at a time when the company is facing challenges in China, one of its key markets.

Not to forget, the ongoing trade war between the U.S. and China will also negatively impact Apple. After reporting Q2 earnings, the company projected a $900 million incremental cost increase due to newly announced tariffs. Apple is a well-managed business, but it does not seem to be attractive as an investment option today.

## **Is Apple a Buy, Sell, or Hold?**

On Wall Street, AAPL stock carries a Moderate Buy consensus rating based on 17 Buy, eight Hold, and four Sell ratings over the past three months. AAPL’s average price target of $228.65 implies approximately 16% upside potential over the next twelve months.

Although Apple seems attractive, many analysts have recently highlighted some of the challenges faced by the company. For instance, MoffettNathanson analysts pointed out a couple of months ago how Apple’s brand value has eroded in China amid lackluster AI progress and rising nationalism. After digesting Q2 earnings last week, Saxo Bank also noted that major innovations are required for Apple to regain lost market share in China.

## **Apple’s China Troubles Persist Despite AI Efforts**

Apple is encountering headwinds in China, one of its critical markets, driven by delays in bringing a foldable smartphone to market and its slow progress in AI. While recent steps on the AI front show some promise, Apple’s market share in China will likely stay under pressure for the foreseeable future. Given these risks, the stock appears fairly valued at current levels, leading me to maintain a neutral stance despite the continued appeal of its share buybacks.

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> **Disclaimer**: This article is for reference only and does not constitute any investment advice.
