Analysts believe that a slow speed of innovation is the root cause for reduced sales of Apple's iPhone in China.

It is an undeniable phenomenon that China's smartphone companies bring new innovations to the market more quickly than American companies do, said Neil Shah, research director for devices and ecosystems at Counterpoint Research in a phone interview with CNBC.

China's homegrown smartphones have created challenges for Apple's iPhone in China. Chinese smartphone maker Oppo topped China’s smartphone market for the first time last month, according to a recent report from Counterpoint. Oppo surpassed Huawei, Apple and Xiaomi with a record 22.9 percent market share, according to a report by Forbes.

"If Apple can't innovate faster in hardware and bring all the features every year or six months like these guys are doing, it will fall behind. By the time Apple has a dual camera, it's almost a year old, which is what most mature smartphone users are realizing," Shah said.

The market share of Apple's iPhone in China dropped to 9 percent in June, showing a year-on-year decrease of 13.2 percent, according to Counterpoint. Analysts said that China's increasingly unenthused market may damage the company's earnings.

According to a report by Reuters, Apple's net profit in the second quarter fell by 27 percent to $7.8 billion. The company's total revenue dropped 14.6 percent in the third quarter, which ended on June 25. Sales in Greater China, once touted as Apple's next growth engine, decreased by 33.1 percent, compared with a 112.4 percent growth in the equivalent quarter last year.

According to a report by CNBC, to accelerate its update period, Apple may be jumping straight to an iPhone 8 in 2017 rather than bringing out an iPhone 7 "S" variant. Furthermore, the report said that Apple is likely to face falling sales unless it can bring out a device to compete with the likes of those by Oppo and Vivo.