iPhone shipments in the PRC are up 20%. How the AI boom may hinder further growth

Apple posted strong growth on its China shipments in the first quarter, but its future growth may be hampered by constraints on the manufacturing side, The Wall Street Journal writes. Amid the AI boom, Apple's key contractor, TSMC of Taiwan, may switch to producing more profitable chips for data centers, the WSJ notes.

Apple's iPhone shipments in China in the first quarter of 2026 grew by 20%, according to this indicator Apple demonstrated the highest growth in the region among the largest smartphone manufacturers, writes Reuters citing data from the research company Counterpoint Research.

Apple recorded such growth in shipments of its products to China against the backdrop of a general market downturn: between January and March, total smartphone shipments to China - the world's largest smartphone market - fell by 4% due to supply chain disruptions and cost-increasing price increases for memory chips. Against this backdrop, manufacturers are raising prices, including on budget models, in an effort to protect margins amid rising component costs, Reuters notes.

However, the two largest suppliers in this market, Apple and Huawei, were able to go against the general trend and register an increase in shipments in China in the first quarter of 2026. But telecommunications giant Huawei, which has the largest share of the Chinese smartphone market at 20% (Apple has 19%), was able to increase its shipments in China by only 2% in the first three months of 2026 - that is, 10 times less than Apple.

Huawei's shipments, notes Reuters, were supported by strong demand in both the premium and budget segments, including its Enjoy 90 series of smartphones.

Xiaomi, according to Counterpoint Research, has fallen to sixth place among the largest smartphone vendors in China - its shipments to this market fell 35% in the first quarter of 2026.

"While most competitors are raising prices, Apple stands out in terms of value: Chinese consumers know its devices last at least three years," said Counterpoint Research senior analyst Ivan Lam.

He attributed Xiaomi's recent results in China to the "high comparison base effect": over the same period last year, the company benefited from aggressive discounts and government subsidies.

Lam estimates that the smartphone market will face additional pressure in the second quarter of 2026, especially amid Chinese brands' plans to continue raising prices. "Nevertheless, we expect Apple and Huawei to fare relatively better, with Huawei likely to show further shipment growth due to sustained demand for its low-end devices," he said.

Apple shares at the premarket on April 17 added 0.4%, while they are down 3% since the beginning of the year. Xiaomi's papers at the trades in Hong Kong on April 17 decreased by 0.2%. Since the beginning of the year they have lost more than 18%.

The Wall Street Journal notes that production of new iPhones may be hampered by constraints from Apple's key partner TSMC, which makes the main processors for iPhones and other Apple devices. The company has been shifting its business toward AI chips, demand for which has been surging in recent months.

The day before, TSMC reported strong first-quarter results, including the highest gross margin in more than 20 years. But the growth was almost entirely fueled by booming demand for AI chips like Nvidia's solutions, which TSMC also makes. That may explain why Apple shares were down about 1% on Thursday, April 16, after TSMC's earnings release, despite gains in most other tech stocks, the newspaper said.

The fact is that while TSMC's AI chip segment revenue grew 20% year-over-year in the first quarter and accounted for 61% of the company's total revenue, TSMC's smartphone chip segment revenue declined 11% year-over-year in the same period and accounted for only about a quarter of TSMC's business. That's the lowest smartphone share of TSMC's revenue in at least eight years, according to Visible Alpha data, the WSJ notes.

The problem for Apple is that TSMC's production capacity is limited - both in the advanced processes needed for the flagship iPhone chips and for AI processors, the WSJ writes.

This article was AI-translated and verified by a human editor