It's a tough time to sell phones in China. The market is shrinking, the parts are getting more expensive, and everyone's margins are getting squeezed. But in every tough market, there are winners and losers. According to the latest data, the winner right now is Apple, and the loser, at least for this quarter, is Xiaomi.

Counterpoint Research reported that China's smartphone shipments fell 4% year-over-year in the first quarter of 2026. The usual suspects are to blame: weak consumer demand, a tough comparison to last year's subsidized sales, and, most pointedly, skyrocketing component costs. Senior analyst Ivan Lam said higher memory prices have limited the effectiveness of promotions and pushed retail prices up across the board, for both old stock and new devices.

He added that these elevated costs are expected to keep the pressure on through the second quarter. The one bright spot? The premium segment, which is holding up relatively well thanks to innovation in features like foldable screens and AI capabilities. If you're going to ask people to spend more money, you'd better give them a reason.

Huawei on Top, Apple on the Move

So, who's navigating this mess? Huawei captured the top spot with a 20% market share. Its success is supported by an improved supply of its Mate 80 series, some helpful government subsidies, and its reliance on domestic suppliers, which has helped cushion the blow from global cost pressures.

But the real story is Apple climbing into second place. Driven by strong demand for its iPhone 17 series, along with promotional pricing and subsidies, Apple delivered the fastest growth among the top six brands. Its shipments jumped 20% year-over-year. Counterpoint noted that Apple is perhaps the best positioned to handle the memory cost crunch, thanks to its premium portfolio and supply chain strength. It can absorb costs more easily and might even use this period to expand its market share while others struggle.

The Great Divergence

Meanwhile, the strategies and fortunes of other major players are diverging sharply under the margin pressure.

OPPO ranked third following its integration of the realme brand, but its profit-first strategy—which included raising prices on older models—has dampened consumer demand. vivo managed to post modest 2% growth, supported by strong low- to mid-range models. HONOR maintained its momentum with key existing models and new launches like the Magic V6.

Then there's Xiaomi. Its shipments cratered, falling 35% year-over-year. The reasons? Weaker performance of its core models and a cautious approach to pricing in the face of those rising costs. When you're in a price-sensitive segment of the market and your input costs go up, you're in a very difficult spot.

Counterpoint sums it up as a "double hit" for phone makers: shipments are declining, and their margins are tightening. The firm expects memory costs to remain high throughout 2026. As brands try to balance pricing and sales volumes, China's overall smartphone market is projected to decline 9% for the full year. The silver lining, if you can call it that, is that this performance is still expected to be better than global trends.

In premarket trading on Friday, Apple shares were up 0.58% at $264.92.