How Will Apple Compete With $168 AI Smartphones From China?

Chinese brands are targeting Apple iPhone users with low-cost, AI-equipped smartphones in the world's largest handset market.

Apple's delayed rollout of "Apple Intelligence" has resulted in a very uninspiring launch of the iPhone 16 in China, while domestic brands are ramping up new low-cost AI-powered smartphones to seize market share from Apple in 2025. 

Goldman's Allen Chang and Verena Jeng wrote in a note to clients over the weekend that an increasing number of Chinese handset brands are releasing AI smartphones for the mid-end market for as low as $168. 

"While AI features powered by Large Language Model (LLM) were only available for high-end models in the beginning (Read more in our initial AI smartphone report in Nov 2023), in the past 12 months, Chinese smartphone brands have actively expanded the AI coverage to mid-end segment," the analysts said. 

How can Apple compete with $168 models, with the one featured below from the Chinese brand Honor? 

"Given Chinese New Year will be around the end of January, we expect more model launches from Feb-Mar after the holiday," the analysts said. 

Meanwhile, Counterpoint's third quarter shows Apple's market share fell 2.6% year-on-year to 13.5%, while domestic brands gained ground: Vivo's share increased by 10%, Huawei jumped by 30%, and Xiaomi increased by 13%. However, Oppo and Honor experienced slight declines. 

In October, China's third bestselling smartphone brand, Xiaomi, pointed out that its new smartphone "comprehensively surpasses" the iPhone 16 Pro in AI capabilities. 

Apple Intelligence is so far unavailable in China...

The big question for CEO Tim Cook is how Apple will compete—will the iPhone SE gain AI capabilities?—as domestic Chinese brands roll out AI-equipped smartphones in the mid-end market for as little as $168.