Apple's iPhone unlikely to recover eroded Chinese marketshare, analyst argues

Posted:
in iPhone edited April 16
CEO Tim Cook once envisioned China as Apple's next big market, set to eclipse even the U.S. in revenue. That dream has taken a raincheck in the past two years, with iPhone units down 8 to 11 percent -- and Apple is unlikely to bounce back, an analyst suggested in a memo obtained by AppleInsider.

Hangzhou, China


Wall Street analysts were previously looking for a 15- to 60-percent unit recovery in Apple's fiscal 2018, but several obstacles are now in the way, said UBS's Steven Milunovich. Apple's primary iPhone market -- the high end, above 4,000 yuan -- is claimed to be "fairly saturated" in China, even though it consists of about 200 million to 300 million people.

Even then, Apple is facing stiff competition from local giant Huawei, and increasingly long customer upgrade cycles. The company is also being hobbled in smaller Chinese cities by weak distribution networks, and the fact that its cheaper phones use outdated features. Except for the iPhone SE, Apple has resisted releasing phones that are both new and inexpensive, preferring instead to discount older products.

Chinese iPhone sales will likely remain flat, with relatively little long-term growth, Milunovich predicts. Non-local smartphones -- mostly from Apple -- saw their shipments decline 16 percent in the March quarter, according to government data.

UBS is nevertheless maintaining a "Buy" rating for Apple stock, with a $190 price target. Indeed, the company's main global rival, Samsung, is doing poorly in China, having had its marketshare stolen by both Apple and local vendors.

Cook has tried to put a positive spin on its numbers. In Apple's most recent quarterly results announcement, Cook said the company was up 19 percent on an average weekly revenue basis, and set an "all-time record" for regional revenue. It's possible to grow income while still slipping behind in share, however.

Price competition could be a running theme with Apple's 2018 iPhone lineup. The company is thought to be working on two more OLED models, sized at 5.8- and 6.5-inches, but at least one analyst has suggested the former could cost $899, while the latter will take up the iPhone X's $999 price tag. A 6.1-inch LCD iPhone might be cheaper still, while retaining features like Face ID and an edge-to-edge screen.
«1

Comments

  • Reply 1 of 23
    I’m not sure focusing on revenues qualifies as “positive spin.” I’d much rather see growing revenues and shrinking unit sales than the other way around. In fact, if they can keep growing profit through higher revenues and margins, they would be crazy to sacrifice either in the name of higher unit sales. 
    mark fearingmagman1979JFC_PAracerhomie3randominternetpersoncornchipwatto_cobrajony0
  • Reply 2 of 23
    Going forward China will be a market filled with questions. As they try very hard to ramp up internal production and may well make it more costly for goods developed in other countries. They may also have steam building for a 'Buy Local' political movement. Where goods designed AND manufactured in China get sales from 'patriotic' buyers. Even if the goods are of lesser quality. Remember all the pressure to BUY AMERICAN CARS in the 70's even when the majority of American cars were crap. I would guess there will be huge internal pressure to buy products that are developed and made in China. And I would imagine there will be growing pressure in the USA to look carefully at any product that has internals put in place via Chinese manufacturing. Who knows what all ends up on that hard drive?
    ksecwatto_cobra
  • Reply 3 of 23
    Chinese companies will dominate the Chinese market...American companies will dominate the American market. The fight will be who will dominate the rest of the world markets, i.e., Asia, South America, Europe, etc.
    ivanhwatto_cobra
  • Reply 4 of 23
    SpamSandwichSpamSandwich Posts: 29,509member
    I don't necessarily agree with this analyst, however in China Apple has no real advantage with regard to their security thanks to Chinese government requirements. It'll take a massive Android breach in China with hundreds of millions stolen from people to shake people up there.
    watto_cobra
  • Reply 5 of 23
    nunzynunzy Posts: 527member
    Apple doesn't care about market share.  The bottom line is profits.
    SpamSandwichJFC_PAJWSCnetmagewatto_cobrajony0
  • Reply 6 of 23
    magman1979magman1979 Posts: 1,029member
    Gee, where have I heard this BS shpeal before???

    *Glares over at Bloomberg, WSJ, NYP, gives up*
    cornchipwatto_cobra
  • Reply 7 of 23
    avon b7avon b7 Posts: 2,466member
    I’m not sure focusing on revenues qualifies as “positive spin.” I’d much rather see growing revenues and shrinking unit sales than the other way around. In fact, if they can keep growing profit through higher revenues and margins, they would be crazy to sacrifice either in the name of higher unit sales. 
    Take services into account and it paints a different picture.
  • Reply 8 of 23
    JWSCJWSC Posts: 116member
    ...  It'll take a massive Android breach in China with hundreds of millions stolen from people to shake people up there.
    Give it time.  It’ll happen.
    watto_cobra
  • Reply 9 of 23
    rogifan_newrogifan_new Posts: 2,998member
    I’m not sure focusing on revenues qualifies as “positive spin.” I’d much rather see growing revenues and shrinking unit sales than the other way around. In fact, if they can keep growing profit through higher revenues and margins, they would be crazy to sacrifice either in the name of higher unit sales. 
    All that means is you’re getting more $$ out of a smaller base. I’m not so sure Tim Cook wants to see shrinking unit sales. Competing phones aren’t garbage anymore (no matter what people here think of Android). How about growing revenues and unit sales? Why does it have to be one or the other? Unless you’re arguing Apple has captured everyone willing to spend what they charge for iPhone and so all the company can do now is extract more $$ from existing customers through services & accessories?
    feudalist
  • Reply 10 of 23
    ivanhivanh Posts: 176member
    iPhone is a 10-year-old OLD product no matter how you spin its evolutions.  Apple needs to move forward and explore something new for everyone.  Not car, not TV, not service, not VR, not AR.  Tim Cook is still the old school guy, "everyone should learn coding"?  Com'on.  Machine Learning can learn how to code in hours.  One day, all a sudden, programmers are all wasted.  Perhaps Apple should find its way to invent a learning machine for everyone.  
    badmonk
  • Reply 11 of 23
    Mike WuertheleMike Wuerthele Posts: 3,111administrator
    ivanh said:
    iPhone is a 10-year-old OLD product no matter how you spin its evolutions.  Apple needs to move forward and explore something new for everyone.  Not car, not TV, not service, not VR, not AR.  Tim Cook is still the old school guy, "everyone should learn coding"?  Com'on.  Machine Learning can learn how to code in hours.  One day, all a sudden, programmers are all wasted.  Perhaps Apple should find its way to invent a learning machine for everyone.  
    So, is the Mac at best a 12 year old product if you just count back to Intel, or at worst a 34 year old one?

    Your foundation for your statement is... questionable.
    netmagewatto_cobra
  • Reply 12 of 23
    tzeshantzeshan Posts: 1,691member
    ivanh said:
    iPhone is a 10-year-old OLD product no matter how you spin its evolutions.  Apple needs to move forward and explore something new for everyone.  Not car, not TV, not service, not VR, not AR.  Tim Cook is still the old school guy, "everyone should learn coding"?  Com'on.  Machine Learning can learn how to code in hours.  One day, all a sudden, programmers are all wasted.  Perhaps Apple should find its way to invent a learning machine for everyone.  
    I agree. Apple keeps the profit margin high for a ten year old product. This is out of business sense. Apple could do it if Apple has the monopoly of smartphone like Microsoft has on the Windows OS. 
  • Reply 13 of 23
    I don't necessarily agree with this analyst, however in China Apple has no real advantage with regard to their security thanks to Chinese government requirements. It'll take a massive Android breach in China with hundreds of millions stolen from people to shake people up there.
    Dude local encryption does not change in China.
    People should just use local iTunes backup if they are worried.
  • Reply 14 of 23
    ivanhivanh Posts: 176member
    ivanh said:
    iPhone is a 10-year-old OLD product no matter how you spin its evolutions.  Apple needs to move forward and explore something new for everyone.  Not car, not TV, not service, not VR, not AR.  Tim Cook is still the old school guy, "everyone should learn coding"?  Com'on.  Machine Learning can learn how to code in hours.  One day, all a sudden, programmers are all wasted.  Perhaps Apple should find its way to invent a learning machine for everyone.  
    So, is the Mac at best a 12 year old product if you just count back to Intel, or at worst a 34 year old one?

    Your foundation for your statement is... questionable.
    Yes. Unix is still Unix no matter the variations, including macOS. The file system has no intelligent AI interface yet, after 34 years. It was once better than Windows but what is the edge now? My 3TB Fusion Drive based iMac is still slow running virtual machines and there is still no native VM. Siri has never, and seemingly incapable of, bi-/multi-lingual mixed languages. It even unable to lookup and translate a language that 55 millions people are speaking and using in the world. New keyboard is worse (hand physiotherapists won’t agree because they have had huge business from it), mouse is lousy. Xcode is much inferior than TurboPascal. Calendar, Reminders, Contacts haven’t been enhanced for years. Long list... Anyhow, I like the touchPad and 5K. MacMini (2012 old version) is the best Mac ever.  Having said that, what’s the point and use of the touchBar on last year’s MBP? Weird. macOS Server support? Kidding me.
  • Reply 15 of 23
    avon b7avon b7 Posts: 2,466member
    Another factor may be patriotism. I'm seeing an increase in commentators saying that anti Apple sentiment is rising on the Chinese social networks as a result of the US decision to put up barriers to Huawei. Apple might be getting caught in the crossfire.
    jony0
  • Reply 16 of 23
    tallest skiltallest skil Posts: 43,338member
    ivanh said:
    Machine Learning can learn how to code in hours.
    Never trust a computer you can’t lift. A computer with a handle told me that, so I’m pretty sure it’s good advice. Someone says they’ve invented hard AI, that someone wakes up next morning with an axe in his mainframe.
    muthuk_vanalingamwatto_cobra
  • Reply 17 of 23
    The Chinese market share of one large smartphone  company that analysts are choosing to be silent about is Samsung. Apple is a top five smartphone company in China and nearly every quarter an analyst gifts the world with another gloom and doom Apple story while remaining silent about how Samsung, the world’s #1 phone company, lost China and Japan. If Chinese companies are hurting Apple then those same Chinese companies have decimated Samsung. 😉
    watto_cobra
  • Reply 18 of 23
    croprcropr Posts: 815member
    nunzy said:
    Apple doesn't care about market share.  The bottom line is profits.
    Apple DOES care about market share, but not at the expense of a profit drop.

    Products like Facetime, Homepad and Apple Pay only make a chance in a country if the iPhone has a reasonable market share in that country. 
    muthuk_vanalingamwatto_cobra
  • Reply 19 of 23
    foljsfoljs Posts: 285member
    ivanh said:
    iPhone is a 10-year-old OLD product no matter how you spin its evolutions.  
    So? The internet is 50+ years old, and I don't see you moving out of it anytime soon...

    Or how about electricity? Has it gone out of style?
    Apple needs to move forward and explore something new for everyone.  
    Really? Like which other company?
    Not car, not TV, not service, not VR, not AR.  

    A magical pony perhaps? 

    netmagerandominternetpersonwatto_cobrajony0
  • Reply 20 of 23
    avon b7avon b7 Posts: 2,466member
    The Chinese market share of one large smartphone  company that analysts are choosing to be silent about is Samsung. Apple is a top five smartphone company in China and nearly every quarter an analyst gifts the world with another gloom and doom Apple story while remaining silent about how Samsung, the world’s #1 phone company, lost China and Japan. If Chinese companies are hurting Apple then those same Chinese companies have decimated Samsung. 😉
    True but Apple is still heavily dependent on mobile. Samsung is not. Just think, they are still world number one in spite of problems in China.
Sign In or Register to comment.