CNBC's Steve Kovach joins 'Money Movers' to discuss Apple's rebound in China.

Beijing

Apple's iPhone sales in China have returned to growth, driven by government subsidies, trade-in deals, and retailer discounts, particularly during major shopping events. According to research from Catalyst, Apple sold over 10 million iPhones in the second quarter, though it still trails behind Huawei, which sold more than 12 million phones during the same period.

Despite this positive trend, Apple continues to face significant competition from local brands and has not yet been able to launch its Apple Intelligence feature in China due to regulatory delays. The company's most expensive iPhone models are not eligible for government subsidies, and ongoing trade tensions between the US and China may continue to impact consumer sentiment and brand loyalty. Future sales will depend on upcoming product launches and the continuation of subsidy programs.

Apple returns to growth in China

Apple just won a four Mag 7 name set to report this week and some new iPhone sales data out of China could shed some light on what to expect. Our Steve Kovac has that in today's tech check. Morning Steve. Yeah some good data Carl coming out of here ahead of earnings on Thursday. China though it's still a sore spot for Apple as it loses market share to its big rival out there Huawei. But some good news in this report. iPhone sales are growing again and that's thanks to government subsidies, trade-in deals and some other discounts from retailers. Now these latest figures for the second quarter come from the research from Catalyst. They say Huawei sold more than 12 million phones in the second quarter. Apple sold a bit more than 10 million. Now Apple has a long way to go in China coming out of the COVID pandemic. It's been steadily losing market share to Huawei. Even with that 4% growth in the last quarter in iPhone shipments though China's business is well off its highs. But sales declines weren't as bad quarter over quarter in Apple's last earnings report. So there's your signal that things could start to be bottoming out there. This wasn't a sudden surge in demand though. China's subsidy program covers some iPhone models which helped spur growth. And China's government started those subsidies at the end of last year and a bit into this year to help juice consumer spending overall. That also benefited Huawei and a bunch of other name brands out there too. Plus Chinese retailers discounted devices for that big 618 shopping holiday from the retailer JD.com. It's kind of like their version of Amazon Prime Day. So lots of discounts in May and June. Now the challenges for Apple out in China. It has not been able to launch Apple intelligence in China yet. Financial Times reported last month that China is delaying that decision because of President Trump's trade war. That was supposed to happen in the spring but China's government still hasn't approved it. In the meantime Chinese brands have AI in their devices and Apple's most expensive phones are not eligible for those government subsidies. So over the next year here's what to watch for. New designs are expected that could entice some of these Chinese customers. That includes the super thin iPhone model we're expecting to launch this fall and then that foldable phone next year guys. Steve do we know how long those subsidies are expected to last and also just the brand equity in China right now with the U.S. and China undergoing trade talks and you know is there any kind of sentiment shifts away from American brands as they undergo kind of the reworking of the trade relationship? Yeah I'm not sure how long much longer the subsidy program is going on but as far as the brand equity that you're talking about this is not a new story with Apple in China. This has been going on for the last two or three years since Huawei again started making phones again. Has it exacerbated amid the trade war? Maybe a little bit. Our Eunice Yoon has done some really good reporting on this how there's this kind of back-and-forth between iPhone owners in China going over to Huawei and then trying to entice them back. So I would really watch out to see what that subsidy picture though Leslie looks like when the next crop of iPhones come out in the fall and if Apple can benefit from that. But keep in mind it's not for those most expensive pro phones. That's where Apple makes most of its money. It's for those lower tier models that get those subsidies Leslie. True ASPs are important Steve. We'll see what we get Steve Kovach on Apple.

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