While most of the numbers announced yesterday were broadly in line with analyst expectations, there was one particularly disappointing element: revenue from China. This was down 29% on the previous quarter, and a full 33% year-on-year – from $13.2B in Q3 2015 to $8.8B the same quarter this year.

CEO Tim Cook pointed to slowing growth in the Chinese economy as a factor, but there are two other factors at play …

Apple used to be the aspirational brand in China as elsewhere. But local companies have been working hard at building their own brand images, transforming themselves from suppliers of low-cost smartphones to premium brands offering upmarket models.

Xiaomi is one threat to Apple, cloning everything from Apple’s designs and names to its approach to marketing. The company is still trying hard, taking two anticipated future iPhone features – dual cameras and OLED screens – and putting them into a new smartphone launched the same day as Apple announced its results.

Xiaomi has also been playing the patriotism card, running billboard ads with large red characters labelling its phones as the ‘Made-in-China smartphones’ (a somewhat ironic attack on Apple given that most iPhones are also made in China).

But the WSJ notes that Xiaomi is no longer Apple’s biggest problem in China.

The smartphone startup’s China sales have been eclipsed this year by Huawei and Oppo, which have both launched sleek high-end smartphones in recent months aimed at taking on the iPhone. Huawei’s P9 sports a dual-lens camera and a slimmer profile than the iPhone 6s, while Oppo’s R9 touts the fastest battery charging on the market. Both devices come in luxury colors: gold and rose gold.

Gartner analyst C.K. Lu told the paper that both brands have succeeded in positioning themselves as premium brands, able to compete head-to-head with Apple.

Huawei and Oppo are recognized as brands as good as Apple. Or not quite as good as Apple, but people don’t feel less superior using them.

Apple now sits in fifth place in China, behind Huawei, Oppo, Vivo and Xiaomi. Samsung is also finding it tough going in China, and is fighting back by competing on price – a move that is hurting Apple as well as Chinese brands.

Samsung Electronics Co. has moved to slash phone prices in China in a bid to claw back lost market share in the country. 

It’s not all bad news, however. IDC China CEO Kitty Fok said that Apple sales will likely get a boost when the iPhone 7 is launched, and that it still leads the market in brand loyalty.

“Apple has very loyal users,” she said. “Once you are an Apple user, you usually stay an Apple user.”

But if the iPhone 7 underwhelms, as many expect, things could continue to be tough in China for some time.

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