Apple, despite increasing its focus on China over the years, has faced a new wave of competition from local smartphone manufacturers that have hindered its growth in the country. One analyst doesn’t see things improving this year, either…

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In a note to investors obtained by CNBC today, UBS analyst Steven Milunovich explained that China’s smartphone market will likely continue to slow this year. The analyst attributes this to slowing upgrade cycles and saturation as new smartphone manufacturers enter the market. Milunovich writes:

“We think it’s doubtful China returns to its 2015 peak as local brands have caught up and upgrade cycles are lengthening,” analyst Steven Milunovich wrote in a note to clients Monday.

“Although industry experts see aspirational buying patterns, the market as a whole has begun to slow due to saturation and lengthening upgrade cycles. Our experts agreed that upgrade cycles started to lengthen in 2017 and will continue to do so in 2018.”

As for Apple specifically, Milunovich notes that 2015 was the peak for iPhone sales. That year, the analyst estimates that China represented 25 percent of total iPhone shipments, versus 19 percent in the most recent quarter. As for 2018, Milunovich isn’t expecting much to change as Apple faces increasingly stiff competition from local manufacturers who have “become adept” at replicating features:

“We expect a flattish market, give or take a few points of growth depending on the overall market and product cycle,” he wrote. “There will be continued pressure from local competitors that have become adept at quickly replicating features.”

While the iPhone 8 reportedly gave Apple a small bump in China, the company still lags behind competitors such as Huawei, Oppo, Vivo and Xiaomi. Whether or not the flagship devices coming later this year change that remains to be seen.


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