Jon Swartz

USA TODAY

SAN FRANCISCO — Apple’s diving share of the key Chinese smartphone market can be explained in three words: cheap local rivals.

And it’s not the only major manufacturer to suffer. A new report from IDC showed China-based Xiaomi’s sales crashed even harder in the second quarter.

Apple’s smartphone sales in the June quarter (8.6 million shipments) plummeted 32% from a year ago, dropping it to No. 5 in the market from No. 3, IDC said Tuesday. The iPhone SE, introduced earlier this year, misfired because Chinese consumers prefer larger screen-sized phones, IDC said.

Things were worse for Xiaomi, the Chinese start-up once touted as the country's answer to Apple. Its sales dove 38% to 10.5 million, knocking it off its top-ranked perch to No. 4.

Chinese phone makers Huawei, OPPO and vivo – lower-cost alternatives to Apple – made significant inroads at the expense of the Cupertino, Calif.-based company. They now rank 1-2-3 in China, based on total shipments for the quarter. Huawei sold 19.1 million smartphones in the quarter, followed by OPPO (18 million) and vivo (14.7 million), IDC said.

Aggressive consumer marketing and a “focus on product differentiation” loomed large in their success, Xiaohan Tay, an analyst at IDC Asia/Pacific, said in a statement.

OPPO, for instance, highlighted its fast-charge technology and Huawei touted its camera.

It’s been tough sledding for China in Apple. Iphone sales in the world’s most-populous country were for years a pivotal reason for Apple’s smartphone success worldwide, until recently making it Apple’s second-largest market.

But a tepid economy and intense competition contributed to a 33% plunge in quarterly revenue, to $8 billion, pushing the region's contribution behind Europe's.

The recent plight of the iPhone — whose sales have declined the last two quarters — has prompted Apple to explore other ways of pumping up revenue in China. On Tuesday, Apple CEO Tim Cook, visiting China for at least the second time in four months, said the company will build its first Asia-Pacific R&D center in China, according to the official Chinese state broadcaster.

Apple could not immediately be reached for comment.

Meanwhile, Apple's recent $1 billion investment in Didi, known as the Uber of China, proved shrewd when Didi said it would buy and merge Uber’s Chinese operations.

Apple could also reverse, or slow its slide, in China with a new iPhone, expected to be announced next month.

Apple could win in Uber-Didi deal

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