China Phones Gain on AI

What happened

Apple's market share in China declined 9% year-over-year in early 2025, placing it fifth with 13.7% of the smartphone market. This follows Chinese manufacturers promoting apps to facilitate switching from iPhones, capitalising on Apple's pending Beijing approval for its AI features. ByteDance introduced an AI tool, powered by the Doubao large language model, enabling voice-activated tasks, initially on ZTE phones before wider deployment. Apple is partnering with Alibaba for AI features in China, its largest market outside the US.

Why it matters

Apple's delayed AI feature deployment in China, contingent on regulatory approval, introduces a significant competitive constraint, increasing exposure to market share erosion. This regulatory dependency weakens Apple's control over its product feature roadmap and competitive responsiveness in a critical market. The burden falls on Apple's product development, regulatory compliance, and strategic planning teams to navigate approval processes and mitigate competitive disadvantage. This raises due diligence requirements for market forecasting and competitive strategy.