• Huawei maintains top market share at 19% despite a 27% sales drop, driven by aggressive trade-in offers and subsidies.
  • Apple (AAPL) posts growth as the only major brand, reaching its highest January share in five years with iPhone 17 traction and government subsidies.
  • Demand remains soft, with sales expected to improve in February due to seasonal Lunar New Year buying.

China's smartphone market faced a steep 23% year-over-year decline in January 2026, according to data from Counterpoint, as a tough comparison with last year's subsidy-driven surge and a shift in Lunar New Year timing weighed on performance. The slump highlights ongoing challenges in the world's largest smartphone market, where vendors are grappling with inconsistent subsidies and rising memory costs that have pressured pricing into 2026.

Huawei led the market with a 19% share, even as its sales fell 27% from the previous year. The company's position was bolstered by aggressive trade-in offers and subsidies, part of its recovery strategy following US sanctions that restricted chip access and spurred in-house development. "Huawei's ability to hold onto the top spot despite the drop shows its resilience in a tough environment," said an analyst familiar with the matter, who spoke on condition of anonymity. Efforts to reach Huawei for comment were not immediately successful. The company, which reclaimed the top spot in 2025 with shipments of 46.7-46.8 million units, has seen its recovery stem from chip breakthroughs and a focus on premium devices like foldables, which dominate 70% of China's market.

In contrast, Apple was the only major brand to post growth in January, reaching its highest January share in five years. The iPhone 17 gained traction and qualified for government subsidies, driving upgrades in features like storage and display. Apple's shipments grew 4% in 2025 to nearly match Huawei, and its Q4 2025 dominance with a 22% share set the stage for this performance. A source close to Apple's operations noted that subsidies played a key role, adding, "Without these incentives, the growth might have been more muted." The company's success comes amid a broader premiumization trend, with consumers increasingly opting for high-end models despite soft overall demand.

Market dynamics reveal a complex picture. China's smartphone market contracted 1% in 2025 to 282.3 million units, and the January 2026 slump reflects demand softness post-subsidy pull-forward. Broader trends include AI and HarmonyOS investments, as well as domestic brands shifting overseas to markets like India and Africa. According to industry insiders, rising costs are challenging vendors' ability to maintain competitive pricing, with some predicting further downward pressure on the overall market in 2026.

Looking ahead, sales are expected to improve in February with seasonal Lunar New Year buying, though the long-term outlook remains cautious. Analysts forecast a continued battle between Huawei and Apple in the high-end segment, with value growth likely driven by AI and ecosystem developments. Huawei's foldable lead and chip stability are seen as key advantages, but the company faces fierce competition from brands like vivo and Xiaomi, which posted growth in 2025. As one market watcher put it, "The race is far from over, and February will be a critical test of whether demand can rebound."