Although Apple’s iPhone sales during the crucial Christmas season probably increased by 3%, marking the firm’s strongest gain in five quarters, analysts predict that the business will have a challenging year in China due to regulatory obstacles and Huawei’s resurging competitiveness.

Wall Street anticipates that Samsung’s (KS:005930) upcoming Galaxy S24, equipped with generative artificial intelligence technologies, and a Huawei phone that runs on a processor built in China would present serious competition for the company’s most recent flagship iPhone 15.

This year, the choice of who will take the top spot as the largest firm in the world may depend heavily on generative AI.

With a $3 trillion valuation, Microsoft (NASDAQ: MSFT) has surpassed Apple in recent trading sessions, and experts predict that as it sells more AI-powered goods, it will solidify its position.

Even with an almost 50% increase in value last year, Apple shares (NASDAQ: AAPL) were the least successful of the so-called Magnificent Seven firms.

Apple has encountered certain challenges in China since the nation’s real estate industry is experiencing difficulties and Chinese officials have hinted that iPhones are becoming less popular in government buildings.

According to market research company IDC, iPhone sales to China decreased by 2% in the December quarter. Analysts noted that Android phones are seeing a significant resurgence in China, partly due to Huawei’s widespread use.

A note from Ming-Chi Kuo, an analyst at TF International Securities, stated that “The iPhone faces structural challenges that will lead to a significant decline in shipments in 2024, including the emergence of a new paradigm in high-end mobile phone design and the continued decline in shipments in the Chinese market,“

Apple’s services division, which includes income from the App Store, Apple TV, and Apple Music, is probably going to be the best part of the company’s first-quarter earnings, which are expected to be released on Thursday.

Based on LSEG statistics, Apple’s services sector revenue probably increased by 12.5% in the quarter that concluded in December.

But in Europe, a new regulation would compel Apple to permit developers to forego its payment methods and start paying Apple commission in March, which will pose challenges for the App Store.

Apple is predicted to post quarterly sales that increased by 0.7% overall, reversing a run of four consecutive quarters of declines.

However, according to Bernstein analysts, iPhone sales would decline by 3% in 2024, hardly increasing total revenue.

Pre-orders for Apple‘s Vision Pro, the company’s riskiest venture since the release of the iPhone over ten years ago opened on January 19 in the United States. This year, analysts do not anticipate it to be a significant source of revenue.

“Greater clarity on GenAI initiatives, a successful roll-out of the Vision Pro, and updated capital allocation policies have the potential to be catalysts for Apple over the next six months,” Angelo Zino, a CFRA Research analyst, said.