What Apple didn’t tell investors in November 2018, or say in its January 2019 revenue warning, was that sales of the XR weren’t simply attributable to a cooling Chinese economy. Instead, Chinese consumers were choosing to buy phones from Huawei. Apple had dealt with copycats since the earliest days of the iPhone, but most Chinese rivals could be ignored—they catered to the low end of the market. Huawei was different. It competed with Apple in the top tier, and in 2018, Apple executives began observing that Huawei’s latest Mate phone was awfully good, outshining Apple in features rather than just price.
Four days before the November 1 earnings call, Cook had held a Sunday meeting with other executives. “In China, we’re worried about the new Mate devices,” he told the team. He was right to be concerned. Just a few years earlier, the gap in quality between iPhones and Chinese handsets was stark. But Apple had brought up quality across the region, and the gaps were closing. Within a year, Huawei would be outselling Apple not just in China but globally.
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