Apple is facing continued challenges in its crucial Greater China market, missing analyst estimates for sales in the region during its fiscal fourth quarter reported Thursday. While the tech giant posted strong overall iPhone demand, its performance in Greater China remains a significant concern for investors and industry watchers.
The company’s struggles in China are closely tied to its Apple Intelligence AI software rollout. Although Apple launched its highly-anticipated AI features in the US on Monday, Chinese consumers will have to wait until April 2025 for Apple Intelligence to become available in Chinese language. This delay puts Apple at a competitive disadvantage in one of its most important markets.
Competition from local manufacturers is intensifying. Chinese smartphone makers like Huawei and Xiaomi are aggressively competing for market share, capitalizing on Apple’s delayed AI rollout. To address this challenge, Apple is reportedly in negotiations with Chinese tech giants, including Baidu, to bring their AI capabilities to iPhones through partnerships similar to its arrangement with OpenAI. However, all generative AI models must receive approval from Chinese regulators before deployment, adding another layer of complexity to Apple’s strategy.
CEO Tim Cook announced during Thursday’s earnings call that Apple will roll out additional AI features around April, coinciding with the Chinese language launch. So far, the company has introduced only a limited number of AI functions, taking a cautious approach to deployment.
Industry analysts are divided on Apple’s strategy. Jacob Bourne at EMARKETER noted that “Apple is prioritizing execution over speed — a strategy that could prove to be either prudent or potentially costly depending on how quickly competitors advance their AI capabilities.” Meanwhile, Wedbush Securities analysts, who maintain an “outperform” rating on Apple stock, predict the China region “should now be on a pace to show high single-digit growth and potentially double-digit as the iPhone 16 cycle plays out in this core region and AI likely hits in April.”
The success of Apple’s AI strategy in China remains uncertain, with analysts noting it will take months to determine whether Apple Intelligence can significantly impact sales in Greater China.
Key Quotes
Apple is prioritizing execution over speed — a strategy that could prove to be either prudent or potentially costly depending on how quickly competitors advance their AI capabilities.
Jacob Bourne, an analyst at EMARKETER, commented on Apple’s cautious approach to rolling out AI features. This observation captures the central tension in Apple’s strategy: whether careful execution will pay off or allow competitors to gain an insurmountable advantage.
should now be on a pace to show high single-digit growth and potentially double-digit as the iPhone 16 cycle plays out in this core region and AI likely hits in April.
Wedbush Securities analysts, who maintain an ‘outperform’ rating on Apple stock, expressed optimism about the company’s prospects in China once AI features launch. This suggests some analysts believe the AI rollout could significantly boost sales despite current challenges.
Our Take
Apple finds itself in an uncomfortable position: caught between regulatory requirements, competitive pressures, and consumer expectations in its second-largest market. The company’s trademark deliberate approach to product launches may be a liability in the fast-moving AI landscape, where competitors can iterate quickly and capture market share. What’s particularly striking is how AI has transformed from a nice-to-have feature into a must-have capability that directly impacts hardware sales. The April timeline creates a critical window where local competitors can solidify their AI advantages. Apple’s partnership discussions with Baidu and other Chinese tech giants reveal a pragmatic recognition that success in China requires local AI solutions, not just translated versions of Western technology. This could establish a precedent for fragmented AI ecosystems across different markets.
Why This Matters
This story highlights a critical juncture for Apple as it navigates the intersection of AI innovation and geopolitical complexity. China represents one of Apple’s largest markets, and the company’s ability to compete there increasingly depends on AI capabilities rather than hardware alone. The delayed rollout of Apple Intelligence in Chinese demonstrates how AI deployment faces unique regional challenges, particularly in markets with strict regulatory requirements.
The situation underscores a broader trend: AI is becoming a key differentiator in consumer technology, potentially driving upgrade cycles and brand loyalty. Apple’s cautious “execution over speed” approach contrasts sharply with competitors who may move faster, raising questions about whether quality or velocity matters more in the AI race. For the broader tech industry, this case study reveals how AI regulation and localization requirements can create significant barriers to entry, even for the world’s most valuable companies. The outcome will likely influence how other Western tech companies approach AI deployment in regulated markets and could reshape competitive dynamics in the global smartphone industry.
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Source: https://www.businessinsider.com/apple-china-headache-not-going-away-soon-ai-iphone-i2024-11