Why is Apple so successful in China? (2023)

Why has Apple been successful in China?

Their success was driven by their expansive product portfolio—namely the X70 and Reno 7 series—and aggressive offline penetration. After restoring relationships with suppliers, Chinese brand Honor captured fourth place with 15% market share.

The Bottom Line

The reason behind that—and behind Apple's success—is that its devices are beautiful to look at and a pleasure to use. That's why the company has such a powerful brand and lofty stock valuation. The marketing helps, and the media and fan frenzy never hurt.

For close to two decades, Apple and China have been inextricably linked. The world's most populous country not only accounts for the bulk of Apple's device manufacturing but also a significant portion of its sales.

Apple's iPhone used to be highly coveted in China simply because it is a foreign brand, which was in line with China's imported consumerism trend.

A Reuters analysis of Apple's supply chain data shows China's prominence in the company's global manufacturing is declining: In the five years to 2019, China was the primary location of 44% to 47% of its suppliers' production sites, but that fell to 41% in 2020, and 36% in 2021.

Obviously, it makes other products, but none of them are the reason Apple is a $2.5 trillion company. The iPhone isn't just Apple's most important product, it's the device all other smartphones are measured against.

Apple's market share peaked in China — with 1 in every 4 devices sold being iPhone.

Apple Built Its Empire With China. Now Its Foundation Is Showing Cracks. Lawmakers' objections to an obscure Chinese semiconductor company and tough Covid-19 restrictions are hurting Apple's ability to make new iPhones in China.

Why are most Apple products made in China? Although everyone assumes Apple products are made in China because labor is cheap there, that's only part of the story – and an increasingly small part, as the company's assembly partners move toward more and more automated operations.

Why does Apple choose to manufacture iPhones in China instead of the US?

Put simply there's not enough manpower to support the manufacturing of Apple's products. The factory in China where Apple products, specifically iPhones, undergo final assembly has approximately 230,000 workers. In the US, there are only 83 cities that have the same population as this factory's number of employees.

Even among top brands, Apple stands out for its high degree of differentiation and control. By manufacturing its flagship A15 and M1 processing units in-house, Apple gained even more pricing power and logistical flexibility in the market as others struggled with chip shortages and related supply chain issues.

Apple depends on a small number of megafactories in China and Taiwan for much of its manufacturing. Harsh COVID-19 lockdowns in China are spawning pushback and protests, jeopardizing iPhone production. Apple has few options in the near term.

That's because one of its key assembly facilities in the Chinese city of Zhengzhou was “operating at significantly reduced capacity” due to Covid curbs. For years, Apple has relied on a vast manufacturing network in China to mass produce the iPhone, iPad and other popular products found in households around the world.

It fell to 19% for November 2023 versus 21% in November 2022. The decline in market share wasn't so deep due to the overall smartphone market seeing a 34% decline as well. Apple's drop is a supply issue created by China's zero Covid policy and subsequent fallout at a Foxconn plant.

“The supply chains of companies like Apple are incredibly vulnerable because they're concentrated almost exclusively within China,” Qazi added.