Published 25 February 2025
For years, Apple brought indispensable FDI to China, millions of jobs, tech know-how, and the ultimate symbol of Beijing’s mastery over globalization. Now Apple’s sales are shrinking, it’s losing turf to Chinese rivals, made concession after concession to Beijing, and is squarely in the US-China crossfire. What if China decides it does not need Apple as much as Apple needs it?
Apple has been enormously successful in China. China has been Apple’s second-largest market and the production base for up to 95% of the products it sells worldwide. But concerns over Chinese competitors, supply chain resilience, and geopolitical tensions raise questions of whether Apple will be able to leverage its position in China to the same extent in the future.
The environment for foreign firms in China is becoming increasingly complex. China has adopted more stringent regulations on data acquisition, storage, and use. The Chinese Communist party-state’s influence on the economy is increasing. Industrial policies embodied in a series of major initiatives and enshrined in the 14th Five-Year Plan (2021-2025) involve massive state support aimed at enhancing China’s position in a range of high-technology industries. Geopolitical and economic tensions between China and the West have been rising. Competition is increasing and consumer preferences are evolving rapidly. The result is that many foreign firms are rethinking their strategies in China.1
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Apple has been enormously successful in China. China has been Apple’s second-largest market and the production base for up to 95% of the products it sells worldwide. But concerns over Chinese competitors, supply chain resilience, and geopolitical tensions raise questions of whether Apple will be able to leverage its position in China to the same extent in the future.
Apple’s history is the stuff of legend. Founded by Steve Jobs and Steve Wozniak in 1976, Apple’s market capitalization hit US$1 trillion in 2018, US$2 trillion in 2020, US$3 trillion in 2023, and US$3.5 trillion in 2024. Its businesses now include smartphones, personal computers, tablets, wearables, electronic accessories, technical support, cloud services, digital content, and payment services. Half of Apple’s fiscal year 2024 sales of US$391 billion came from iPhones (51%); a quarter from services (24%); and a range of wearables, home products, accessories (9%), and iPads (7%). It is striking that personal computers, the device that began its legend, now accounts for a mere 8%.2 Apple’s net income that year was US$94 billion.
By the end of 2024, Apple was still the world leader in smartphone shipments (23.2% share as of the last calendar quarter), followed by Samsung (15.6%), and the Chinese companies Xiaomi (12.9%), Transsion (8.2%), and Vivo (8.2%). As a group, Chinese companies accounted for roughly 50% of global shipments.3
Apple entered the China market selling PCs through third parties in 1993 and began developing relationships with Chinese universities, software developers, and officials. The first Apple Store in China, opened in Beijing in July 2008, just before China’s historic Summer Olympics enshrined the nation’s arrival as a global power, soon became the highest-grossing Apple store in the world. The number of Apple stores in China grew to six in 2012 to 44 in 2022 then to 58 in January 2025.4 Apple products are also sold through a large network of approved third-party retailers; e-commerce platforms like JD.com, Tmall, and Pinduoduo; and many unlicensed retailers.
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Apple’s Greater China (including the Chinese mainland, Hong Kong, Taiwan, and Macau) sales took off with the introduction of the iPhone to China in 2009, going from US$2 billion in 2010 to US$58.7 billion in 2015, before falling to US$40 billion in 2020 in the midst of Covid disruptions and reaching US$74 billion in 2024. These represented 8%, 25%, 15%, and 20% of the company’s global net sales respectively, showing the importance of the China market to the company.5
China is even more important to Apple as a production base than a sales market. Apple turned to foreign outsourcing starting in the 2000s, with China as the centerpiece due to low costs, an extensive electronics supply chain, superior availability of production engineers, and a vast pool of assembly workers recruitable at short notice that could ramp up production faster and more effectively than anywhere else in the world.6 Apple’s Chief Executive Officer Tim Cook said in October 2023 that 95% of Apple products were manufactured in the Chinese mainland.7 The impact of Apple’s production system on China has been profound, as a driver of technological capabilities and with millions of people employed directly or indirectly throughout the country.
Taiwanese-headquartered Foxconn, already a leading contract manufacturer, started assembling Apple PCs in 2000 and became the dominant producer of iPhones, managing supply chains, manufacturing, and logistics, and allowing Apple to focus on product development, design, software, and marketing and sales.8 Foxconn, now the largest private-sector employer in China, developed several component and assembly sites around China, including massive complexes in Shenzhen and later Zhengzhou that have employed 300,000 to 400,000 people at their peaks. The Zhengzhou facility reportedly was able to hire 50,000 workers in a single month in preparation for the launch of the iPhone 16 last year.9
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Apple has had to deal with the Chinese Communist party, the Chinese state, and Chinese state-owned enterprises since it entered China. The three powerful state-owned telecom companies control mobile services in China. Apple’s negotiations with China Mobile began in November 2007 and ended unsuccessfully in early 2009. Apple then reached a three-year exclusive deal with China Unicom and official iPhone sales in China started in late 2009. Apple went on to sign additional distribution agreements with China Telecom in December 2012 and China Mobile in December 2013, finally reaching distribution through all three firms six years after its first attempt.10
Apple has adjusted its China activities to comply with telecommunications, data, and services regulations. The introduction of the iPhone into China was delayed and its internet functionality initially removed to satisfy regulators. In 2024, iPhone sales in China were hurt as Apple had not achieved a solution on AI functionality that could pass muster with Chinese regulators.11 Apple began storing China data at facilities owned by state-owned China Telecom in 2014 and after the enactment of China’s 2017 cybersecurity law shifted all the data for its China iCloud customers to data centers run by a company owned by the Guizhou provincial government.12 Apple shut its online book and movie services in China in 2016 in response to new regulations limiting online content provision.13
Apple has repeatedly had to make major concessions to defend its business in China. In December 2021, The Information reported that Apple CEO Tim Cook had signed a secret five-year agreement with Chinese officials in 2016 in which Apple agreed to support Chinese initiatives in advanced manufacturing and software, increase training of Chinese engineers, increase mainland Chinese companies’ share in Apple components and assembly, invest in Chinese technology companies, and cooperate with Chinese universities on new technologies. The agreement involved commitments in the order of US$275 billion, more than Apple’s sales of US$248 billion in China in the period.14 Apple also agreed to store personal data from Chinese users on servers operated by Chinese state-owned enterprises, censor tens of thousands of apps, and in other ways cooperate with China’s data security apparatus.15 In return, Apple was reportedly able to reverse negative views of the company among China’s leaders; was allowed to operate iCloud, Apple Pay, and its App Store; and was exempted from several rules other foreign companies had to follow.16
US-China trade tensions in 2018-2019 and the disruptions from Covid-19 in 2020-2022 led Apple to seek to reduce the potential vulnerability of its reliance on China.17 As of 2022, Apple was reportedly planning to move 40% to 45% of iPhone production to India and the assembly of a portion of other products to Vietnam.18 By January 2024, analysts at the investment firm TD Cowen estimated that Apple’s suppliers, including Foxconn, had invested US$16 billion since 2018 on production capabilities outside of China. Analysts predicted it would be feasible to migrate a significant portion of personal computer production, but more difficult to migrate the bulk of smartphone production in the next few years.19 The Economic Times of India reported that US$14 billion worth of iPhones was assembled in India in the 12 months ending June 2024, representing 14% of global iPhone production.20
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China has signaled its displeasure with this diversification, opening tax and land-use investigations of Foxconn in October 2023 that analysts have linked to Apple’s efforts to diversify its production base.21 New Chinese restrictions on the export of dual-use products, technologies, and services applied as of 1 December 2024 have made the export of equipment, materials, and technology Apple wishes to send to other places subject to new and lengthy inspections and delays.22 These moves signaled that Apple has to tread carefully with its plans to reduce dependence on China, as it cannot decentralize overnight and its China activities remain subject to retaliation.
Apple has found itself in the middle of trade tensions as well. It was one of the most vocal opponents of the tariffs the US administration imposed on China in 2018 and 2019, though it managed to secure exemptions for its own products after a meeting between Tim Cook and President Donald Trump. In 2023, in response to Biden administration attempts to limit China’s tech industry, the Chinese government announced that iPhones and other foreign-branded devices would be banned for workers in central government agencies.23 Apple shares fell 3% after Trump announced 10% tariffs on all goods from China in early February 2025.24
Apple has on occasion received backlash in the US and elsewhere for its operations in China. Apple was criticized for working conditions at its factories that precipitated large-scale protests at Foxconn’s iPhone facility in Zhengzhou in 2022.25 It has been accused of supporting censorship in China.26 Analysts claim that concessions to Chinese authorities on data protocols may compromise data privacy and security for customers. According to the New York Times, some 55,000 apps available in other countries disappeared from Apple’s China Apps Store between 2017 and 2021.27
Looking ahead, Apple also faces a major challenge from Chinese competitors. Apple’s share of smartphone shipments in China went from 7.5% in 2012 to 12% in 2021 to 17% in 2022 and 2023 and to 15% in 2024, with Chinese firms accounting for the rest of the market. While Apple had seen ups and downs in sales before, its 17% fall in China shipments for 2024 was its worst ever. Meanwhile, local rivals Vivo and Huawei saw full-year shipments rise 11% and 23% respectively.28 Of particular concern is that Chinese competitors made inroads in high- and low-end segments in 2024. Huawei’s resurgence came as it used local semiconductors developed through massive Chinese state support to get around sanctions that limited its access to US technology. Other Chinese companies introduced new high-end foldables. Apple’s 2024 China shipments were also hurt by a lack of AI functionality as ChatGPT is not available in China and Apple has yet to incorporate a local alternative.29 Chinese companies are also expanding globally, accounting for roughly half of global smartphone shipments in 2024.
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Apple has arguably been the most successful foreign company in China. China is its second-largest market and its dominant production base. The combination has allowed Apple to become the most valuable company in the world. In return, Apple has been responsible for millions of jobs in China, supported Chinese universities and research institutes, created a vast supplier network, raised the level of Chinese technological capabilities, supported Chinese government initiatives, agreed to data controls, deleted thousands of apps from its app store, and invested in Chinese companies. Apple has also been a vocal opponent of trade and investment restrictions on China. The relationship has been symbiotic, with Apple and China both benefiting enormously. And Apple has played the politics of being an extremely prominent US company, with an extremely prominent position in China, exceedingly well.
But even Apple is not immune to new challenges. Chinese smartphone competitors are getting much better and already account for roughly 50% of smartphone shipments worldwide. Apple’s reliance on a hyper-efficient production system in China helped make the company what it is today but is proving problematic in the aftermath of the pandemic and in the face of East-West tensions. As these tensions mount, Apple runs the risk of angering one or both sides. And one wonders whether at some point China will decide it does not need Apple as much as it has to date.
While Apple seeks to reduce its reliance on China, China appears to be seeking to reduce its reliance on Apple. For both, untying the knot may prove difficult. Apple’s China challenges are only likely to grow.
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[1] Michael J. Enright, "Rising challenges for foreign firms in China," Hinrich Foundation, 10 September 2024, https://www.hinrichfoundation.com/research/article/us-china/rising-challenges-for-foreign-firms-in-china/, accessed 2 February 2025.
[2] Apple Inc., Form 10-K For the Fiscal Year Ending September 28, 2024, https://s2.q4cdn.com/470004039/files/doc_earnings/2024/q4/filing/10-Q4-2024-As-Filed.pdf, accessed 4 February 2025.
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[20] "India’s share of electronics exports rose in FY24, driven by Apple, says Eco Survey," The Economic Times, 22 July 2024, https://economictimes.indiatimes.com/industry/cons-products/electronics/indias-share-of-electronics-exports-rose-in-fy24-driven-by-apple-says-eco-survey/articleshow/111923322.cms, accessed 7 February 2025.
[21] Jacky Wong and Nathaniel Taplin, "For China, Bullying Apple Suppliers Could Backfire Badly," Wall Street Journal, 30 October 2023, https://www.wsj.com/tech/for-china-bullying-apple-suppliers-could-backfire-badly-21daf854, accessed 7 February 2025.
[22] Lauly Li, "China slows supply chain shifts by Apple, others as Trump 2.0 looms," Nikkei Asia, 14 January 2025, https://asia.nikkei.com/Spotlight/Supply-Chain/China-slows-supply-chain-shifts-by-Apple-others-as-Trump-2.0-looms, accessed 7 February 2025.
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[26] John Ruwitch, "Apple, accused of supporting China's censorship, is now facing new criticism," NPR, 26 December 2022, https://www.npr.org/2022/12/26/1145509265/apple-airdrop-china-censorship-criticism, accessed 8 February 2025.
[27] Jack Nicas, "Apple’s Compromises in China: 5 Takeaways," The New York Times, 17 May 2021, https://www.nytimes.com/2021/05/17/technology/apple-china-privacy-censorship.html, accessed 8 February 2025.
[28] Canalys, "Mainland China’s smartphone market records 4% full-year growth in 2024, led by vivo," 16 January 2025, https://www.canalys.com/newsroom/china-smartphone-market-q4-2024, accessed 7 February 2025.
[29] Liam Mo and Brenda Goh, "Apple loses smartphone sales crown in China, drops to third in 2024," Reuters, 17 January 2025, https://www.reuters.com/technology/apple-smartphone-shipments-china-fell-25-q4-canalys-says-2025-01-16/, accessed 7 February 2025.
© The Hinrich Foundation. See our website Terms and conditions for our copyright and reprint policy. All statements of fact and the views, conclusions and recommendations expressed in this publication are the sole responsibility of the author(s).
Michael Enright is a leading expert on international competitiveness, regional economic development, and international business strategy.
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