Apple's iPhone sales in China were down more than 30% year over year for the first week of January, while competitors such as Xiaomi and Huawei have "remained much stronger" with flat sales, according to a Sunday note from Jefferies analysts.
Jefferies analysts said they believe Apple's iPhone volume will fall by double digits this year in China, adding that they "expect Apple to have even higher revenue pressure in China in 2024."
The note from Jefferies analysts Sunday follows Apple's rocky start to the year, as shares slipped on downgrades from Barclays and Piper Sandler, warnings from its supplier Foxconn about first quarter revenue decline and reports that the U.S. government is preparing an antitrust lawsuit.
Huawei gained the most smartphone market share in China in 2023, according to the note, rising about 6% year over year. Meanwhile, Apple's market share in China has fallen around 4% year over year, according to the note.
"As we highlighted last week, iPhone's lower market share YoY in China is a negative surprise, and we believe the cannibalization is coming from not just HW, but also Xiaomi and 'others,'" the analysts said, referring to Huawei.
Shares of Apple were down less than 1% in premarket trading Monday before the company announced the release date of its Vision Pro headset. Shares closed up more than 2%.
The Jefferies analysts said iPhone discounts in China are on the rise, which is likely part of Apple's effort to "defend its share." They found that discounts for some iPhone 14 models rose "significantly" in China last week, while some existing discounts were increased even further.
Apple did not immediately respond to CNBC's request for comment.
— CNBC's Michael Bloom contributed to this report.
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