Waning iPhone demand highlights Chinese consumer anxiety

The iPhone is Apple's biggest product, accounting for about 60% of its revenue in the July-September quarter, the latest report said.

Other brand names such as Ford and Tiffany & Co have already reported abrupt declines in sales to Chinese buyers.

China is still one of the fastest-growing economies, with 2018's expansion forecast at about 6.5%.

But its tariff fight with the US and an avalanche of bad news about tumbling car and real estate sales are undermining consumer confidence after two decades of almost unbroken rapid growth.

"It's definitely worrying," said China specialist David Dollar, senior fellow at the Brookings Institution.

"Overall, consumption growth is slowing down in China."

Emily Li, a 37-year-old advertising designer in Beijing, said she is putting off replacing her car or making other major purchases.

"People are worried about losing jobs," she said.

Weakness in Chinese demand is especially painful for Apple and other smartphone makers as China accounts for one-third of the industry's global handset shipments.

Shipments in China fell 10% from a year earlier to 103 million handsets in the quarter ending in September, according to research firm IDC.

It expects last year's total Chinese purchases to shrink by 8% to 9% compared with 2016.

The belt-tightening in the world's second-largest economy is hitting global industries, including cars and designer clothing, that count on China to drive sales growth.

The trade war with Washington has shaken a "sense of China's invincibility", said Mark Natkin, managing director of Marbridge Consulting, a research firm in Beijing.

Chinese consumers are waking up to the fact that their economy is vulnerable to the uncertainties of the global economy, he said.

The slump is a setback for the ruling Communist Party's efforts to nurture self-sustaining, consumer-driven economic growth and wean China from its reliance on exports and investment.

China's third-quarter economic growth of 6.5% was stronger than most other major economies, but the country's lowest since the 2008 global crisis.

The deceleration partly reflects a deliberate government campaign to rein in China's high debt levels.

At the same time, Beijing has sought to relieve the economic pain with higher government spending.

"They're trying to aim at a very fine target," said Mr Dollar, a former World Bank and US Treasury Department official.

They want to see the economy slow down, but they don't want to see it slow down too much.

China reported this week that factory activity shrank in December for the first time in more than two years.

And car sales in the biggest global market are on track for their first annual decline in three decades after plunging 16% in November.

Soft real estate sales have forced developers to cut prices.

Overall, export growth decelerated to 5.4% over a year earlier, less than half October's 12.6% rate.

Sales to the US market have held up despite President Donald Trump's punitive tariffs on 250 billion dollars of Chinese goods, rising 12.9% in November over a year earlier.

But that was thanks partly to exporters rushing to beat further American duty increases - a trend that is starting to fade.

Apple's setback also highlights another challenge: increasingly capable Chinese competitors whose products cost less.

In smartphones, that includes Huawei, Oppo, Vivo and Xiaomi.

Some are priced as low as 500 yuan (€64).

Others have beaten the American giant to market with features Chinese users want, such as phones that can use separate carriers for voice and data.

That has eroded the iPhone's cachet and customers' willingness to pay premium prices.

"I think 10,000 yuan (€1,275) for an iPhone is too much," said Vivian Yang, a manager at a Beijing technology company.

"Nobody needs such a phone."

Apple's third-quarter shipments in China fell 13% from a year earlier to 7.5 million units, according to IDC.

Its market share of 7.5% put it in fifth place at less than one-third Huawei's 24.6% share.

In his letter to Apple shareholders, Mr Cook gave no China sales figures for the final quarter of the year but said traffic to retailers declined as "mounting uncertainty" fuelled by the trade fight weighed on demand.

Globally, Apple fell behind Huawei to become the number three brand by number of handsets sold in the third quarter, according to IDC.

South Korea's Samsung Electronics was in first place.

Yuan Yuan, a 26-year-old employee of a social media company in Beijing, reflects the pressures on urban professionals squeezed by rising living costs and job uncertainty.

Mr Yuan said his monthly income fluctuates between 3,000 and 10,000 yuan (€383 and €1,275) and only covers living expenses.

As a university student, Mr Yuan had an iPhone paid for by his parents.

But once he had to buy his own, he switched to a lower-priced Xiaomi.

"I have no plans to buy an apartment, a car or any other major items," Mr Yuan said.