Tim Cook made an appearance on Monday in an unexpected place: A video gaming tournament in China.
The Apple CEO stopped by the gaming event, hosted at its store in the southwestern city of Chengdu. The event featured Tencent’s smash hit “Honor of Kings,” the top mobile game by revenue for the first half of the year, according to Apptica. Cook took to Chinese social media to celebrate the tournament, saying its “energy was off the charts” in a post on Weibo.
Cook’s surprise stop coincides with a tricky time for Apple in China, its biggest non-U.S. market and a major production hub. Demand for the iPhone 15, the company’s latest smartphone, is slowing, according to two recent analyst reports.
Chinese iPhone 15 sales during its first 17 days on the market underperformed when compared to the period following the launch of last year’s iPhone 14, according to preliminary data from Counterpoint Research shared with Fortune. The market research firm noted that sluggish sales in China differed sharply from robust demand in the U.S.
“China’s headline numbers for the 15 series are in the red, and this is a reflection of the broader decline in consumer spending,” said Mengmeng Zhang, a research analyst at Counterpoint Research. Chinese consumers are scaling back their spending amid a stumbling economic recovery, dragged down by twin crises of real estate and youth unemployment.
Separately, Counterpoint Research also found that Huawei, which recently launched its high-end Mate 60 smartphone, was one of the few brands to report growth in the third quarter of this year. State media has celebrated Huawei’s latest phone as proof that the company and China can withstand U.S. sanctions.
A report from Jefferies, also released Monday, is predicting a decline in Apple sales in China as well. Jefferies analysts forecast that weak demand in China could lead to lower-than-expected global shipments of the iPhone 15 this year, according to CNBC.
The iPhone is still Apple’s largest moneymaker, representing 52% of its sales last year. The China market contributed almost 20% of Apple’s revenue in 2022. Chinese factories also make about 85% of Apple’s iPhones, according to a December 2022 estimate from Counterpoint Research.
Apple’s regulatory challenges
Cook’s video gaming stop isn’t his first trip to China this year. The Apple head was one of the first U.S. CEOs to travel to the country following Beijing’s relaxing of COVID controls, including inbound quarantine for international arrivals. Cook attended a high-profile development conference, and celebrated the “symbiotic kind of relationship” between Apple and China. The company also complies with Chinese rules on data security and censorship.
Yet new rules from Beijing are complicating that relationship. China reportedly ordered staff at several government agencies not to bring iPhones to work. (Beijing officials denied those reports, but highlighted unspecified security concerns with Apple’s smartphones)
The iPhone maker is also grappling with new censorship rules that require any program sold on Chinese app stores, including Apple’s, to be licensed by the Chinese government. (Currently, Chinese users can download and install apps for banned services like YouTube and WhatsApp, but must resort to a virtual private network if they want to use them). Apple is now asking new apps to show proof of Chinese government approval. Once the grace period for existing apps ends in March, Apple may be forced to remove thousands of foreign apps from its Chinese store.