Apple's iPhone continues to register robust consumer demand in China even as the broader smartphone market weakens, according to a Jefferies research note that draws on February data from China's Ministry of Industry and Information Technology (MIIT).
The MIIT figures show China-wide smartphone shipments dropped 12.6% year-on-year in February, after a roughly 16% decline in January. Jefferies adjusted for the Chinese New Year timing effect and reports combined January and February shipments were down 14.3% year-on-year. Within that overall downturn, local Android brands declined 12.1% while foreign brands - effectively the iPhone on a shipment basis - fell 25.7%.
Despite the steeper sell-in decline for iPhone shipments, the inventory and sell-through picture favors Apple. Jefferies' analysis indicates Android inventory days have increased by an estimated 8.4 days on a six-month rolling basis, while iPhone inventory days have fallen by 7.4 days over the same timeframe. The divergent inventory trends point to considerably stronger end-consumer demand for Apple devices relative to Android alternatives.
Industry checks cited in the Jefferies report indicate iPhone sales volumes in China rose nearly 20% year-on-year in the first three months of 2026, with March growth exceeding 20%. Jefferies' analysts attribute part of this momentum to Apple's recent pricing approach. The report notes the base iPhone 17 256GB model is priced the same as its predecessor while offering double the storage capacity, and that the newly launched iPhone 17e 256GB carries the same price as the 16e while likewise providing twice the storage.
Analysts led by Edison Lee commented on that pricing stance: "We believe aggressive pricing of the 17e is a strong indication that Apple would like to grow its iOS user base and gain share, in order to grow its service and future AI revenue, as well as maintain supply chain bargaining power." The Jefferies team also suggested Apple may aim to use volume growth through 2026 to offset margin pressure from sharply higher memory costs.
The environment for Android vendors looks more challenging. Jefferies notes memory costs surged roughly 75% quarter-on-quarter in the first quarter of 2026. Faced with that cost pressure, multiple Chinese Android manufacturers have begun passing higher component costs on to consumers through elevated launch prices.
Recent models from OnePlus and iQOO carried average price increases of 28% and around 30%, respectively, versus their predecessors. Jefferies' analysts caution that additional price increases are likely, observing that many of the hikes seen so far reflect memory cost inflation from the fourth quarter of 2025 rather than the more recent spike in early 2026.
The team warned of a potential feedback loop: higher retail prices could weaken sell-through, which in turn would further depress shipments given the elevated inventories already held by some Android makers. "Sellthrough could weaken further, which will drag shipment even more given high inventories," the team warns. Jefferies also highlighted a supply-side risk for smaller Android brands, noting that some could be forced to cut production if they cannot secure adequate memory supply.
Against that backdrop, Jefferies said it continues to prefer exposure to the iPhone supply chain over the Android supply chain.
Context and implications
The MIIT shipment declines describe a smartphone market contracting in early 2026, with Apple showing relative strength at the consumer level despite a larger reported sell-in drop. Inventory movement suggests Apple is converting a higher share of its sell-in to end-user sales, while Android manufacturers are accumulating more inventory days as component costs rise and retail prices move higher.
For market participants and investors, the contrast in inventory and pricing dynamics has implications for supplier selection, retailer promotions, and near-term margin trajectories for handset makers that face sharply more expensive memory costs.