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Apple's iPhone declines in China, and this year could be a struggle

Apple's iPhone declines in China, and this year could be a struggle

Apple's iPhone shipments in China declined by double digits in 2016, and Chinese brands are threatening more than ever

Perhaps the next iPhone 8 will be Apple's next shot at achieving greatness in China.

The current iPhones aren't helping Apple gain market share in China, according to Canalys. Markets like China and India are at the top of Apple's agenda to grow the iPhone business.

China accounts for a third of worldwide smartphone shipments. Buyers in the market are leaning toward local brands like Huawei, Oppo, Vivo, and Xiaomi, which formed the top four smartphone vendors in China in 2016, according to Canalys.

Apple was in the fifth spot, and Samsung doesn't figure in the top five.

In 2016, Apple's phone shipments in China totaled 43.8 million units, a drop of 18.2 percent compared to 2015. It's not looking any better for Apple in 2017.

"This year, the outlook remains bleak for Apple to get its China performance back to its heyday of 2015," said Jessie Ding, a research analyst at Canalys.

The decline in China hit Apple's worldwide shipments hard, with a net effect of about a 7 percent decline in the number of iPhones shipped globally, Ding said.

But the Chinese buyers are "awaiting the 10th anniversary of the iPhone with very high expectations," Ding said.

The iPhone 8 may succeed, but it may not change a long-term trend of Chinese smartphone buyers buying local brands.

In many smaller Chinese cities, Huawei, Vivo, and Oppo smartphones are selling well. Those companies are also investing heavily in branding in top-tier cities, posing a further threat to Apple, Ding said.

Apple faces a similar problem in India. The iPhone brand awareness is limited to urban areas, and the handsets are priced too high for most of the population. Apple recently made a move to start assembling smartphones in India.

Many Chinese companies are launching new handsets this year with a focus on cameras and screens. One such smartphone is Huawei's Mate 9 Pro, which was shown at CES. Huawei -- known for networking gear -- also makes its own chips, like Apple and Samsung.

Other Chinese brands like LeEco are also emerging and growing internationally. LeEco has particularly interesting smartphone designs. The company came out with a smartphone without a headphone jack ahead of Apple.

It's a tight race among the top three Chinese smartphone makers. Huawei in 2016 shipped 76.2 million units, Oppo shipped 73.2 million units, and Vivo about 63.2 million units. Xiaomi's market share tumbled, declining by 21 percent to 51.4 million units.

A survey released by IDC this week also noted a down market for iPhone in China, but placed the company in the fourth spot, ahead of Xiaomi. According to IDC, total smartphone shipments in China were 467 million units in 2016, growing by 8.7 percent.

But Apple's shipments declined by 23.2 percent that year, totaling 44.9 million units. The top three Chinese smartphone makers were Oppo, Huawei, and Vivo, according to IDC.

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