Apple's revenue from China feels heat of local rivals

Apple Inc announced on Tuesday a steep decline in revenue from China in its third fiscal quarter of 2016, as iPhone sales dropped due to fierce competition from local rivals.

The company said its sales in China in the third quarter, which ended on June 25, reached $8.8 billion, down 33 percent from $13.2 billion a year earlier－marking its highest decline among all regions.

During a follow-up earnings call, Apple CEO Tim Cook blamed the current economic environment in China for the disappointing performance. But the company remains "very optimistic about growth opportunities" and will continue to invest in China, he said.

However, analysts said Apple's figures reflect increasingly intensified competition from domestic vendors like Huawei Technologies, Oppo Electronics and Vivo Mobile Communication Technology.

"Local vendors are focusing on premium flagship smartphones that are priced above 2,000 yuan ($300), for instance Huawei's P9 or Oppo's R9. The rising middle class in China welcomes local brands that offer good quality at a lower price point," said Jessie Ding, a Canalys researcher based in Shanghai.

If there is no distinct improvement for the iPhone 7 series, which is expected to be launched in September, consumers who now own iPhone 6S will hardly have a reason to upgrade, Ding added.

According to the research company Counterpoint, home grown smartphone maker Oppo became the No 1 brand in China for the first time in June, with a record 23 percent market share. It was followed by Huawei with 17.4 percent and Vivo with 12 percent. Apple made its way onto the list at fourth place, with 9 percent market share.

Huawei Technologies announced its financial results for the first half of the year on Tuesday. The company's sales revenue increased by 41 percent over the same period last year, with 77.4 billion yuan.

CK Lu, principal analyst at consulting firm Gartner Inc, said: "Chinese brands are taking advantage when Apple's iPhone 6S/6S Plus only offer minor upgrades. Consumers are starting to recognize these Chinese brands in premium sectors."