Apple Shares Slip as AI Lag Hits China Market Share
Huawei has overtaken Apple as the top seller in the region, capitalizing on the delayed rollout of 'Apple Intelligence' and forcing the tech giant to rely on discounts.
Apple Inc. (AAPL) shares traded lower on Monday as new data revealed the company has lost its top position in the critical Chinese smartphone market, highlighting the growing pressure from local competitors who are moving faster to integrate advanced artificial intelligence features.
In midday trading, Apple's stock was down approximately 0.7% to $278.78. The dip follows a report from Counterpoint Research indicating that Huawei has reclaimed its position as China's leading smartphone vendor with an 18.1% market share in the second quarter of 2025. Apple's sales in the region declined by 1.6% year-over-year, a concerning trend in a market that accounts for a significant portion of its global revenue.
The challenge for Apple appears rooted in the escalating AI race. While the Cupertino-based company recently unveiled its "Apple Intelligence" suite of features, its phased rollout has created an opportunity for domestic rivals. Chinese brands like Huawei and Xiaomi have been aggressively marketing their own on-device AI capabilities, from advanced language assistants to sophisticated photo editing tools. Huawei, for its part, launched its "Harmony Intelligence" back in June 2024, giving it a head start in shaping consumer perceptions around AI-native devices.
This competitive pressure forced Apple to adopt a more aggressive pricing strategy. The company's standing in the second quarter was bolstered by significant price discounts during the major "618" online shopping festival, according to the research firm. While the discounts helped move units, the reliance on promotions signals eroding pricing power in a market increasingly favoring homegrown technology.
"The AI narrative is currently dominated by local players in China," said a technology analyst covering the Asian market. "Consumers are seeing tangible AI features on Huawei and Xiaomi devices that are available now, while Apple's full vision for 'Apple Intelligence' feels more like a future promise. In a fast-moving market, that's a dangerous position to be in."
Apple's struggles are compounded by a broader slowdown in the region. Overall smartphone shipments in China fell 2.4% year-on-year in the second quarter, reflecting fragile consumer demand. Yet, within this shrinking market, Huawei managed to grow its sales by an impressive 17.6%, underscoring its resurgence and the strength of its brand locally.
Despite the headwinds in China, Apple's global performance remains robust. The company's worldwide iPhone shipments grew 10% in the same quarter, driven by strong demand in North America, India, and Japan. This global strength suggests that Apple's challenges are, for now, concentrated in the uniquely competitive Chinese landscape.
Looking ahead, investors are weighing the immediate competitive threats against Apple's long-term potential. The full integration of Apple Intelligence, including a revamped Siri, is expected to be a multi-year process. Some analysts believe the real payoff will come later. In a recent note, Wedbush analyst Dan Ives reiterated a bullish outlook, forecasting a potential "AI supercycle" for Apple in 2026 with the launch of the iPhone 17.
For now, however, the tech giant faces the urgent task of defending its turf in one of the world's most important markets, where being perceived as an AI laggard is proving costly.