iPhone 15 pushes Apple to record Q3 – despite Huawei’s resurgence

• Although worldwide smartphone revenues showed no YoY growth in Q3, Apple took the lead in the market.
• It recorded its highest-ever quarterly revenue and revenue share, driven by solid sales of the iPhone 15 Pro Max.
• During July-September, Apple increased its market share in China.

Last month, Apple CEO Tim Cook made a surprise visit to China. The trip came less than a month after the release of the Apple iPhone 15, the company’s flagship smartphone, which received a relatively tepid response in the company’s third-largest market. According to a Counterpoint Research report released not long before, the iPhone 15 series unit sales for the first 17 days of sales in China were down 4.5% compared with the iPhone 14.

The reason for the lukewarm reception from the Chinese market is Huawei, which has reclaimed its position as the leading smartphone manufacturer in China, surpassing Apple. Huawei, just weeks before the iPhone 15 launch, surprised the world with its latest 5G-capable Mate 60 smartphone series, which was hailed as a victory amid US sanctions.

Making matters more complicated for Apple was the fact that the iPhone 15 launch coincided with a government directive to expand a ban on using iPhones in government agencies and state companies across China. All these factors took the shine off Apple’s new release during the first few weeks of iPhone 15 sales.

But it didn’t last for long. “In mainland China, we set a quarterly record for the September quarter for iPhone,” Cook told Reuters in an interview recently. “We had four of the top five best-selling smartphones in urban China.” The demand for Apple’s iPhones in China has remained strong.

For context, Huawei was once the largest smartphone manufacturer in China and a significant competitor to Apple. Due to the challenges it faced from US sanctions, Huawei fell to sixth place in the market, and Apple began to dominate the Chinese market. But to reassure investors, Cook, on a conference call with analysts, said that Apple appeared to have gained market share in China in the July-September period, even if the overall smartphone market may have contracted.

Apple’s sales in China have fallen in three quarters of its 2023 fiscal year, which ended September 30. Some analysts, though, remained optimistic about Apple’s demand outlook in China through the fourth quarter as there were signs that a rebound in the broader smartphone market was gathering pace.

“While the latest iPhone series had underperformed in China in the launch quarter due to a shorter pre-holiday shopping period coupled with supply mismatches on the Pro Max, it could see improvement in the year-ending quarter with a strong 11.11 sales event performance,” research consultancy Counterpoint wrote in a note on Friday.

iPhone 15 pushing Apple to new highs

Counterpoint’s report shows that the Pro Max stood as the best-selling variant of the iPhone 15 series, allowing Apple to achieve its highest-ever Q3 operating profit. The report also highlighted that global smartphone market revenues remained flat year-over-year (YoY) despite growing by 15% QoQ to just over US$100 billion in Q3 2023. 

“Apple led the market with 43% share of global smartphone revenues, its highest-ever for a calendar Q3,” Counterpoint’s senior analyst Harmeet Singh Walia noted. That was despite Apple’s latest iPhone 15 series being available for one less week in the third quarter of 2023 compared to its predecessor in the same period last year. 

“This translated into Apple also clocking its highest-ever share of global smartphone revenue for a September-ending quarter,” he added. Consequently, the global smartphone operating profit also reached an all-time high, signaling how the smartphone market has adjusted to the post-pandemic trend of lower shipments, Walia argued.

China’s OEM eroding Apple’s dominance?

Despite Apple leading the global smartphone market with record Q3 revenue and revenue share, its global smartphone operating profit share remained flat. Counterpoint attributed that to the resurgence of Huawei and Honor, and an increased focus on profitability by other Chinese OEMs such as Xiaomi and OPPO. 

“Counterpoint Research estimates that the Chinese smartphone market declined about 3% during the quarter. Apple’s China revenues fell 2.5% during the quarter. Considering the increased competition from Huawei 5G devices, this is a good signal for Apple and the iPhone 15 series – especially since the Pro Max and Pro were supply-constrained,” research director Jeff Fieldhack commented.

As for Oppo, its focus on phones with higher ASPs, such as foldables — of which the Oppo Find N2 Flip is the top-selling in China — is helping it achieve profitability. Yet, a slowdown in its expansion outside of China and India has brought about a YoY shipment decline, with Oppo’s smartphone revenue in the first three quarters of 2023 being the lowest since the pandemic, Counterpoint’s data shows.

Vivo, while remaining profitable, has faced more significant challenges in its home country, China, where its promotions have been less aggressive than those of Honor and Xiaomi. Vivo’s smartphone revenue fell 12% YoY and is almost half that of Q3 2021, Counterpoint’s data shows. 

Xiaomi is the only top five smartphone brand to see shipment increases both QoQ and YoY in Q3 2023 as it strengthened its positions in key markets such as China and India. Xiaomi also offered more affordable mid-range products at promotional prices to both retailers and consumers on the back of solid sales of the Redmi K and Note series, Counterpoint noted. 

That meant the Chinese OEM achieved both revenue and operating profit growth, both sequentially and annually. Samsung’s ASP, on the other hand, grew 4% YoY due to the successful launch of Fold 5, maintained momentum in S23 series’ sales, and a higher flagship share in major product lineups. 

“Nevertheless, an 8% shipment decline in the same period offset the ASP increase, making Samsung’s revenue decline by 4% annually,” the report reads. The full impact of the iPhone 15 series is yet to be seen, according to Counterpoint. 

“While the latest iPhone series had underperformed in China in the launch quarter due to a shorter pre-holiday shopping period coupled with supply mismatches on the Pro Max, it could see improvement in the year-ending quarter with a strong 11.11 sales event performance, which should also benefit other Chinese smartphone vendors,” Fieldhack added.

Moreover, the elongated festive season in India should boost shipments and revenues in the world’s second-largest smartphone market, where pent-up demand and 5G upgrades will also contribute to growth. Overall, Counterpoint believes the global smartphone market could end the year with cyclical change.