iPhone15 has struggled in China

The iPhone15 sold strongly in Europe and the United States, but in China, initial sales were 4.5 percent lower than the previous model. On the other hand, Huawei is accelerating production of the “Mate60 Pro.”

Apple’s iPhone production in 2023 is expected to reach about 225 million units, the same as in 2022. The iPhone15, which went on sale in September, has enjoyed strong sales in the US and Europe, but initial sales in China were almost 5 per cent lower than the previous model. China’s Huawei will concentrate on producing 10 million new smartphones by 2023. By 2024, the overall scale will double to 60 million units, catching up with Apple.

Several suppliers said the production Forecast, known as the “forecast”, which Apple notifies component companies and others, was unchanged from the previous year. Among them, about 85 million units of the new model iPhone15 series were produced. Apple typically overestimates its Forecast in previous years to avoid losing opportunities.

What is worrying is the Chinese market. As of October 17th, Hong Kong research firm Counterpoint released estimates that within the 17 days after the launch of the iPhone 15, its sales in China decreased by 4.5% compared to last year’s models. This will offset sales in the well started US market.

U.S. research firm IDC predicts that overall smartphone shipments in 2023 will hit the lowest level in the past 10 years. Apple’s final shipments remain to be seen in the business war at the end of the year and the beginning of the year, but it is expected that the launch of the iPhone15 will not be enough to serve as a catalyst for the market.

As the smartphone market matures, innovation in features is diminishing. Apple lags behind in the development of peripheral chips, which also has a significant impact. The company has been pushing ahead with its plan to turn the communication chip into a self-developed product, but it has encountered setbacks. There is a view that Apple’s technical development in software is at an impasse.

Apple has extended its communication chip purchase contract with US chip giant Qualcomm by three years until 2026. Because the switch to autonomous chips is the key to large-scale design and functional changes, one supplier analyzed that “major changes cannot be achieved for at least three years.”

At the same time, China has expanded restrictions on iPhone use in government and state-owned enterprises. In the context of Sino-US confrontation, Apple is increasingly unable to ignore the risks in China.

As if in response to this general, Huawei is accelerating the production of high-function smartphone “Mate 60 Pro”.

Huawei plans to order parts in the form of off-the-shelf, and the first centralized production of 10 million units for the series this year. We are stepping up the procurement of spare parts, and spare parts companies will complete the supply in November. Although not an official order, according to the supplier, 2024 “shows the drive to target 60 million units.”

“Huawei’s strategy is to eat into Apple’s market share affected by China’s restrictions,” said an executive at a company that supplies components to both companies.

Since the United States sanctions, Huawei has been covetously prepared for battle. Under the Trump administration, Huawei spun off its low-cost smartphone brand Honor amid technology regulations on chips and 5G, the standard for high-speed communications. The global market share of Huawei chips, once in the top 10, has fallen off the list.

The Mate 60 Pro, Huawei’s high-performance smartphone launched this summer, is equipped with a chip with a power line width of 7 nanometers, which is believed to be able to support 5G level communication.

TechInsights, a Canadian research firm, concluded that the phone was powered by a “Kirin” chip developed by Huawei and manufactured by SMIC, a Chinese contract manufacturer.

The technology is two generations behind Apple’s 3-nanometer chip, but Huawei’s 7-nanometer chip, which is classified as a cutting-edge product, is still sending shockwaves around the world.

Huawei did not use the advanced extreme ultraviolet (EUV) lithography equipment from Dutch company ASML needed to achieve 7 nm. Experts believe that Huawei has improved performance by repeating the complex methods of previous lithography processes many times, although the production efficiency is low, but managed to highlight the latest technology.

Huawei itself has not publicly stated that the new phones will support 5G. The United States has restricted the export of 5G-related technologies, and Huawei’s purpose is believed to be to avoid relevant criticism. It is only reported that the software is run to produce 5G equivalent speeds.

In terms of functions, the Mate 60 Pro has also added wireless charging and satellite communications and other functions, in the final analysis, it is seeking to become a substitute for the iPhone in China.

As for Huawei’s move, there are voices in the United States, including Congress, calling for further restrictions. The map of power around smartphones may be gradually determined in the future while clearly reflecting the intentions of China and the United States.

Apple did not comment on the Nikkei interview, and Huawei said it had no information to disclose.