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Apple predicted to sell up to 40M iPhones on China Mobile, China Telecom in 2013

post #1 of 12
Thread Starter 
Investment bank Morgan Stanley believes Apple will partner up with both China Telecom and China Mobile "over the next year" to make its iPhone available on all three Chinese carriers, a move that could bring incremental sales of as many as 40 million units next calendar year.

Analyst Katy Huberty issued a note to investors late Sunday noting the vast untapped potential for the iPhone in China. According to her, Apple can only possibly reach 10 percent of the 150 million "high-end Chinese subscribers" in the country through its current partnership with China Unicom.

China Mobile, the world's largest wireless carrier, holds the bulk of the country's high-end subscribers with an estimated 120 million customers who pay more than 100RMB ($16) a month. The final 10 percent of high-end subscribers are on China Telecom, the third-largest carrier in China.

Huberty sees a base case of 26 million incremental iPhone sales in China during the 2013 calendar year with the addition of China Mobile and China Telecom. Her bull case suggests 40 million units for an increase of $10 in earnings per share.

According to the analyst, Apple's sixth-generation iPhone is "likely to be compatible" with China Mobile's upcoming 4G TD-LTE network. She qualified that it is "still too early to know for sure," while restating the firm's belief that the next-generation iPhone will take advantage of a quad-mode baseband chip from Qualcomm. Morgan Stanley expects the next-generation iPhone to arrive in the third quarter of 2012 and a China Mobile iPhone launch to occur in late 2012 or early 2013.


Credit: Morgan Stanley


Assuming similar 20 percent penetration of China Mobile's subscribers as Apple has reached with China Unicom, the iPhone maker would sell 24 million handsets on China Mobile alone next year. However, given that 3G and smartphone penetration in China is "increasing at a fast clip." she believes Apple could sell as many as 36 million units on China Mobile in 2013.


Credit: Morgan Stanley


Huberty expects the iPhone to arrive on China Telecom sooner than China Mobile. Citing recent regulatory approvals, checks in Asia and comments from Apple CEO Tim Cook on last week's quarterly earnings conference call, the firm voiced its belief that the carrier will start distributing the iPhone "in the next few months." The investment bank's analysis suggests that Apple could add between two to four million iPhones in sales from China Telecom next year.

As of last October, China Mobile had 10 million iPhones on its network, despite the fact that it does not officially sell the device and users are limited to slower 2G service because of compatibility issues.

Worldwide, Apple continues to have strong potential for iPhone growth with just 30 percent penetration of global carriers. By comparison, BlackBerry maker Research in Motion has reached 79 percent of the global market. Morgan Stanley's bull case projects 60 million in annual iPhone sales in China "in a few years," assuming a 2-year life cycle and similar market share among high-end subscribers as in the U.S.

A Morgan Stanley survey from last fall revealed that Apple has passed up rival handset maker Nokia to become the top smartphone brand in China. 40 percent of respondents indicated that the iPhone was their first choice for a 3G handset.

For its part, Apple indicated last week that iPhone demand in China was "staggering" during the December quarter. Cook indicated that iPhone 4 sales remained strong even as the launch of the iPhone 4S loomed.

The arrival of the iPhone 4S in China earlier this month attracted crushing crowds that resulted in the postponement of retail sales of the device at Apple's five official stores in the country. Apple's Chinese online store currently lists all models of the handset as sold out.


Police officers cordoned off the Sanlitun Apple store in Beijing after line-waiters pelted it with eggs.


Apple posted 128 percent year-over-year growth in iPhone sales to reach an all-time high of 37 million units in the December quarter. In the days following Apple's announcement of its quarterly results, Wall Street analysts scrambled to raise their estimates for the second quarter of Apple's fiscal 2012.
post #2 of 12
Something doesn't make sense to me. According to the supply and demand we've seen so far, it appears that Apple should have no trouble doing 40mil units in China in the next fiscal quarter or two. What is Morgan Stanley basing this estimation upon, because as many times as I read this article, I am not seeing anything logical in their reasoning.

This woman knows nothing more about Apple's deals than we know, her premises are pretty much pulled out of vague commentary and her own ass, and MorganStanley has a long history of dreadfully underestimating Apple that goes back 10 years.

So...how is Morgan Stanley trying to manipulate the market to its advantage with this report?

Because that's what they're trying to do.
post #3 of 12
Massive!
post #4 of 12
Quote:
Originally Posted by echosonic View Post

So...how is Morgan Stanley trying to manipulate the market to its advantage with this report?

That's pretty much what analysts do all day. Just spewing rubbish that has very little correlation with what the company actually is like and what they do.

At this stage, for China, Apple can sell 100 million iPhones in a year easily. When are the analysts going to understand that China is at Apple's mercy, not the other way 'round. Sure, there's probably a lot of crap Apple has to deal with in China, but tell me Chinese authorities, Foxconn, Chinese workers and Chinese consumers don't want Apple to literally just become a Chinese company 100% and get it over and done with.

But Steve did say, figure out how to build a company, and let it build itself too.

The sexier the carrot dangles in front of the Chinese, the more insane they'll get for anything iPhone and iPad.

1. Apple is not going to go with China Mobile until they feel they have the right deal
2. Apple is going to be cautious with all future iPhone rollouts because the Apple Retail experience in China is so fragile right now.

The ball's in Apple's court. And they'll take all the time they need before they take a swing.
post #5 of 12
The other thing is I think as Apple is already prepping for LTE iPhone 5 (Tallest Skill, feel free to interject ) ~ I'm not sure they want to go with a non-LTE iPhone customised for China Mobile.

The iPhone 4S is the be-all-and-end-all for 3G connectivity. I'm sure Apple is focused on mid-2012 rollout of an LTE iPhone, all the stars point to LTE having enough traction in major markets around the world to have that "premier" icing on the cake. Never mind if say, only 10% of iPhone buyers actually are in LTE markets, but that 10% cream is certainly juicy for Apple, Telcos, 4G LTE in general.

So I think we'll see the mid-2012 LTE iPhone 5, and maybe towards the end of 2012 a TD-LTE iPhone 5 for China Mobile.

Again, they could rip the chipset out of the iPhone 4S and put in a pure TD-CDMA or whatever nonsense China Mobile uses but at this stage, it's just not worth it. They've done a lot with 3G connectivity for so many networks, Sprint, etc. Ex-Clearwire execs have said the Qualcomm royalties are no small figure. I wonder what royalties Apple will have to pay for TD-CDMA... maybe it's not so worth it at this stage. Also, I doubt they would want to cram TD-CDMA into the existing single-baseband-chip iPhone 4S.

All signs point to LTE and associated fall back. Maybe TD-CDMA in the TD-LTE phone, killing two birds with one stone and having a clear engineering pathway, because of course for China Mobile you would need a 3G and 2G fallback where LTE is scant. So maybe, LTE~WorldMode regular iPhone 5 mid-2012, and then TD-LTE/TD-CDMA iPhone 5 end of 2012. You just know if Apple pulls this off, with hundreds of millions of iOS devices sold in 2012 and 2012... MASSIVE, indeed.

Of course, I could be wrong, but this is what I'm feeling at this stage. Correct me if I made any mistakes above.
post #6 of 12
2013? In other news, the world will be even more overpopulated.
post #7 of 12
I thought Apple was selling them as fast as they can have them manufactured already...
post #8 of 12
How are they going to deal with scalpers?

Groups of 500+? Yikes.
post #9 of 12
If China Mobile inks a deal, and an iPhone-4G come outs in 2012, combined with iPhone-4S and iPhone-4 on other networks, 36 million is laughable..... Multiply by three for 2013.... lets start there............................ numbers only go up
post #10 of 12
Analysts are always bullshitting. That's all they do.

But there's one thing that's amazing - whether they sell 40M iPhones, or whether half of the new high end phones are Androids or whatever, doesn't that mean that the Chinese market for high end phones is going to be bigger than the US market?

This could be the beginning of total China dominance... they already make everything. If they start buying everything too they'll officially be THE world super power. Financially. And that's all that matters.
post #11 of 12
Quote:
Originally Posted by orthorim View Post

Analysts are always bullshitting. That's all they do.

But there's one thing that's amazing - whether they sell 40M iPhones, or whether half of the new high end phones are Androids or whatever, doesn't that mean that the Chinese market for high end phones is going to be bigger than the US market?

This could be the beginning of total China dominance... they already make everything. If they start buying everything too they'll officially be THE world super power. Financially. And that's all that matters.

As China already owns $895.6 billion in US bonds as well(link) you could say they already are.
post #12 of 12
Quote:
Originally Posted by mausz View Post

As China already owns $895.6 billion in US bonds as well(link) you could say they already are.

That was from a year ago - the latest figure I saw (which, granted was a few months back and could also be out of date) was that China holds $1.2 trillion in US bonds.
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