Apple's iPhone sales fall as Chinese brands gain ground

Lynsey Barber
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Apple's Biggest Flagship Store In Asia Opens In Beijing
Apple considers China a huge potential market (Source: Getty)

Apple continues to lose ground to Chinese rivals in the global smartphone market, ahead of the highly-anticipated launch of its new flagship iPhone 7.

People are buying fewer iPhones and increasingly turning to challenger smartphone brands from Asia, the latest figures from Gartner show, as Apple confirmed it plans to plough more cash into China.

iPhone sales declined 7.7 per cent year-on-year in the second quarter of the year - the third consecutive quarter where sales went into reverse. Market share declined to 12.9 per cent from 14.6 per cent in the same period last year, but Apple remains the second biggest selling smartphone brand behind Samsung, selling 44.4m handsets.

Read more: Apple is increasing its investment in China

The Korean rival to Apple grew sales by 6.4 per cent, but it was China's Huawei and Oppo which experienced the biggest surge, although from a much smaller base, analysts noted. Huawei sales shot up 16 per cent but it was Oppo which was the star performer, more than doubling its sales.

Apple boss Tim Cook on a visit to China this week revealed the tech company would plough more cash into China, building its first research and development centre in the country. He said earlier that it was committed to investing in the "unbelievable market" in the long-term despite a 33 per cent fall in sales in the country.

Top five best-selling smartphone brands in the world in Q2

1. Samsung  76.7m

2. Apple  44.4m

3. Huawei  30.67m

4. Oppo  18.5m

5. Xiaomi 15.5m

Apple's woes are largely down to the tech titan becoming a victim of its own success.

Comparisons in recent quarters now include the launch of the iPhone 6 and 6 Plus, Gartner analyst Anshul Gupta told City A.M., the huge success of which was down to huge pent up demand for Apple's first larger screen iPhone.

"Beating that is becoming a challenge now. Demand is lower. Users haven't upgraded or are waiting for the new model. It's a moment of weakness," he said.

Earlier this year Apple reported its first ever decline in iPhone sales and revenue, but managed to inch ahead of those lowered expectations in the most recent quarter.

Read more: Everything we think we know about Apple's iPhone 7 so far

Gartner forecasts that will continue throughout the rest of the year, with sales likely to be flat or slightly lower in 2016, but confidence remains in the longer term.

" We do have an upward looking trend for the iPhone but 2016 is still likely to be sluggish," said Gupta, pointing out that the first iPhone 6 users are now nearing the point of upgrade two years on from its launch.

Regarding sales of the cheaper iPhone SE model earlier this year, Gupta said: "It did help, but not to the extent to compensate for weakness in the demand for the flagship iPhone."

Read more: Apple's iPhone sales and revenue fall again - but Wall Street's loving it

Overall, the global smartphone market grew by 4.3 per cent in the quarter with smartphone sales totaling 344m, although this was largely driven by emerging markets. Japan was the only mature market to experience growth.

That overall trajectory is expected to continue for the year, with sales hitting 1.5bn in 2016, up between 4.5 and five per cent. However, that would indicate a slowdown - sales growth in 2015 was in the double digits. Rather than a weakening of the smartphone market, Gupta said the figures indicated a maturing of the market.

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