Apple sells 80% of iPhone-class, $600+ smartphones in China

Posted:
in iPhone edited May 2017
Low-end Chinese phones from companies that barely turn a profit and sell their cheaper products outside of urban centers are growing fast, but, Apple has an 80 percent lock on premium phone sales in China that isn't weakening. That's fueling Services and driving buyers into Apple Stores for other premium gear.

Apple missing out on the pyrrhic victories

New data from Counterpoint shows that the overall Chinese smartphone market only grew by just 4 percent in Q1. Much of that growth came from high volume, low price sales of phones in the $100-199 and $300-399 segments.

Those low-end and middle-tier phones are largely built by BBK (under its Oppo and Vivo brands), Lenovo and Huawei. Those markets had previously been serviced by Xiaomi and Samsung, who lost significant share in China's lower end smartphone market.

However, Apple has never been a player in lower smartphone segments. The company's least expensive iPhone SE starts at 3288 RMB (slightly above $500), and most of Apple's sales are 4000 RMB and up (over $600).

Apple sells 80% of China's premium, profitable phones

The premium market segment (+4000 RMB) has remained flat year-over-year, but Apple has a virtual lock on those sales, creating the very cycles that drive waves of fake news about Apple's performance in China.

"The 4000 RMB and above segment mostly peaks during the Apple iPhone launch quarter and shrinks for the rest of the year," noted Counterpoint researcher Neil Shaw.


Source: Counterpoint Model Sales Tracker - Q1 2017


"Apple's share of this super-premium segment remains at 80 percent, with five out of the top ten model SKUs belonging to Apple."

Counterpoint data shows that four configurations of Apple's newest iPhone 7 took a combined 71.5 percent of the premium segment alone. Other vendors' phones in the top ten included Samsung's S7 Edge with 3.4 percent share, a premium Vivo model with 4.2 percent share, and three Huawei Mate9 models that together accounted for 12.2 percent of premium phones sold.

Counterpoint's data reflects findings Kantar reported in March, noting that "iPhone 7 remains the top-selling smartphone in Urban China."

Apple is earning most the profits in China (and elsewhere)

Mix in large volumes of low-end products sold to emerging Chinese markets outside of cities, and Apple's profitable, premium iPhones appear to be losing "market share."

Counterpoint said Apple's share of all smartphones shipments in China fell year over year from 12.5 percent to 10.7 percent, diluted by large sales of low-end phones to a different group of buyers.Huawei, combined with BKK's Oppo and Vivo brands, "contributed more than half of the Chinese smartphone market in Q1 2017" but accounted for less than 5 percent of global smartphone profits last year

If Apple saw any opportunity in the sub-$500 market segments, it would presumably enter them. Last spring, Apple's lowest priced iPhone SE reportedly won share in China.

However, below the price of iPhone SE, the growing bloom of cheap Chinese phones hasn't resulted in profitability for makers.

China's Huawei, combined with BKK's Oppo and Vivo brands, "contributed more than half of the Chinese smartphone market in Q1 2017" but accounted for less than 5 percent of global smartphone profits last year. Xiaomi and ZTE couldn't report profits at all.

Just in China, Apple earned about $10 billion from iPhones last year, almost four times as much as the top five domestic brands combined.

China's ambitious LeEco aimed at producing $399 phones and growing globally, but after mocking Apple's iPhone SE as having a "very low level of technology," its own (slower) flagship failed to find a market, resulting in the company pulling out of its new American headquarters and curtailing its plans.

Cook "enthusiastic about our opportunity in China"

In Apple's most recent earning call, its chief executive Tim Cook noted that Apple's year-over-year performance in China has improved over the past two quarters.

"First half revenue was down 13 percent year over year, about a third of which was attributable to FX [unfavorable currency exchange rates]. That's in contrast to a 32 percent revenue decline in the second half of last year."

Cook also noted that "in Greater China, we were very pleased to see strong double-digit revenue growth from both Mac and Services during the March quarter," highlighting that Apple's sales growth goes beyond iPhones and that Apple's iOS installed base is buying apps.

"We also had great results from our retail stores in mainland China," Cook stated, "with total store revenue up 27 percent over last year and comp store revenue up 7 percent. These results contributed to our improving performance in Greater China."

Cook added, "we continue to be very enthusiastic about our opportunity in China."

Comments

  • Reply 1 of 14
    edrededred Posts: 48member
    But, but, but... Apple is doomed, doomed I tell you!
    watto_cobra
  • Reply 2 of 14
    calicali Posts: 3,495member
    Now that DED has debunked this doomed can we make up another theory why Apple is doomed?

    seriously more Apple Stores in China will boost sales. Just getting started.
    watto_cobra
  • Reply 3 of 14
    avon b7avon b7 Posts: 3,914member
    sog35 said:
    I bet its much higher than 80%

    That 80% is based on the sticker price of those phones.

    The crappy Huawei and Vivo phones sell for much less than $500, even though they sticker for that amount.

    The only one that sells for over $500 is the Samsung S7 at 3%.
    Please tell me where I can get a P10 Plus for much less than $500?
    STBarett
  • Reply 4 of 14
    avon b7avon b7 Posts: 3,914member
    cali said:
    Now that DED has debunked this doomed can we make up another theory why Apple is doomed?

    seriously more Apple Stores in China will boost sales. Just getting started.
    Nothing was debunked. Apart from posters here where does the 'doomed' line get posted most?

    Counterpoint also said:

    • Premium segment ($400 above) smartphones now contribute to almost 20% of the global smartphone market. However, the segment declined annually due to softness in iPhone volumes and controlled inventory of the Samsung flagship Galaxy S7/S7+ ahead of Galaxy S8 series launch.
    • The ‘affordable premium’ segment $300~$399 was the fastest growing smartphone segment during the quarter mainly driven by OPPO, vivo and Samsung A series smartphones.
    That 'affordable premium' segment saw year on year growth of almost 50% in Q1.

    Is it reasonable to believe that the affordable premium phones might actually be shaving sales off the other premium sales? Can that segment continue double digit growth?

    On top of that, there are now more premium phones competing with Apple and Samsung. There's going to be more of a squeeze through this year and that can only be good for the market as a whole.
  • Reply 5 of 14
    rogifan_newrogifan_new Posts: 4,100member
    cali said:
    Now that DED has debunked this doomed can we make up another theory why Apple is doomed?

    seriously more Apple Stores in China will boost sales. Just getting started.
    I guess Apple should hire him because he spins better than Tim and Luca do.
  • Reply 6 of 14
    calicali Posts: 3,495member
    cali said:
    Now that DED has debunked this doomed can we make up another theory why Apple is doomed?

    seriously more Apple Stores in China will boost sales. Just getting started.
    I guess Apple should hire him because he spins better than Tim and Luca do.
    Well they do cite facts and actual numbers. Maybe they should lie?
    watto_cobra
  • Reply 7 of 14
    cali said:
    cali said:
    Now that DED has debunked this doomed can we make up another theory why Apple is doomed?

    seriously more Apple Stores in China will boost sales. Just getting started.
    I guess Apple should hire him because he spins better than Tim and Luca do.
    Well they do cite facts and actual numbers. Maybe they should lie?
    No need to lie. You know that, there are lies, damn lies and then statistics. Just choose the numbers that ONLY suits you, and explain away the ones which do not suit you !!! That is called putting a positive spin, isn't it?
  • Reply 8 of 14
    sog35 said:
    avon b7 said:
    sog35 said:
    I bet its much higher than 80%

    That 80% is based on the sticker price of those phones.

    The crappy Huawei and Vivo phones sell for much less than $500, even though they sticker for that amount.

    The only one that sells for over $500 is the Samsung S7 at 3%.
    Please tell me where I can get a P10 Plus for much less than $500?
    the P10 did not make the list..

    Yup. But where does Mate 9/9 Pro sell for <$500?
  • Reply 9 of 14
    lkrupplkrupp Posts: 7,154member
    What? Wait one goddamn minute. Apple is failing in China. We have that hammered into our heads every single day by the tech media. The Chinese phone makers are eating Apple’s lunch in China. No Chinese worker can afford an iPhone. This is established FACT. 
  • Reply 10 of 14
    pk22901pk22901 Posts: 139member
    lkrupp said:
    This is established FACT. 
    What's your criteria for "established FACT"?

    (Or are you being sarcastic?)




  • Reply 11 of 14
    avon b7avon b7 Posts: 3,914member
    lkrupp said:
    What? Wait one goddamn minute. Apple is failing in China. We have that hammered into our heads every single day by the tech media. The Chinese phone makers are eating Apple’s lunch in China. No Chinese worker can afford an iPhone. This is established FACT. 
    While inequality in China is a very real problem there are still lots of workers who can afford one. Perhaps one of Apple's problems is that there is a percentage of potential users who want to flaunt their high end phones as status symbols and Apple is now very stale with its well known iPhone 6/7 design. This late in the day, there isn't anything 'fresh' in the looks of an iPhone. All that should change when the new iPhone is released but it may come too late to save their position in China.
  • Reply 12 of 14
    xiao-zhixiao-zhi Posts: 76member
    avon b7 said:
    lkrupp said:
    What? Wait one goddamn minute. Apple is failing in China. We have that hammered into our heads every single day by the tech media. The Chinese phone makers are eating Apple’s lunch in China. No Chinese worker can afford an iPhone. This is established FACT. 
    While inequality in China is a very real problem there are still lots of workers who can afford one. Perhaps one of Apple's problems is that there is a percentage of potential users who want to flaunt their high end phones as status symbols and Apple is now very stale with its well known iPhone 6/7 design. This late in the day, there isn't anything 'fresh' in the looks of an iPhone. All that should change when the new iPhone is released but it may come too late to save their position in China.
    There is nothing "fresh" in the designs from Oppo/Vivo or Huawei flagships. Particularly, Vivo clones iPhone design style and Huwaei, while it has a more distinctive look, clones Apple model numbers. The market for these phones is targeting aspirational buyers that can't afford iPhone premium and that is OK. The same holds true for the India market now where Xiaomi is a leader and getting more traction than their Chinese competitors. 

    If the Chinese market was driven by "different", Samsung would be doing better with it's S and Edge designs, but their sales are low and the traffic through their stores in cities is pathetic.
  • Reply 13 of 14
    avon b7avon b7 Posts: 3,914member
    xiao-zhi said:
    avon b7 said:
    lkrupp said:
    What? Wait one goddamn minute. Apple is failing in China. We have that hammered into our heads every single day by the tech media. The Chinese phone makers are eating Apple’s lunch in China. No Chinese worker can afford an iPhone. This is established FACT. 
    While inequality in China is a very real problem there are still lots of workers who can afford one. Perhaps one of Apple's problems is that there is a percentage of potential users who want to flaunt their high end phones as status symbols and Apple is now very stale with its well known iPhone 6/7 design. This late in the day, there isn't anything 'fresh' in the looks of an iPhone. All that should change when the new iPhone is released but it may come too late to save their position in China.
    There is nothing "fresh" in the designs from Oppo/Vivo or Huawei flagships. Particularly, Vivo clones iPhone design style and Huwaei, while it has a more distinctive look, clones Apple model numbers. The market for these phones is targeting aspirational buyers that can't afford iPhone premium and that is OK. The same holds true for the India market now where Xiaomi is a leader and getting more traction than their Chinese competitors. 

    If the Chinese market was driven by "different", Samsung would be doing better with it's S and Edge designs, but their sales are low and the traffic through their stores in cities is pathetic.
    When I say fresh, it really all boils down to change and being the opposite of continuing with the same look. Huawei has launched all those bright colours on the P10 as they think there is a flagship user fashion group that puts the visibility of the phone high up on their list of wants. In that sense it's very fresh. The iPhone hasn't really changed through the last two versions (even Gruber admits it's gone stale). Whether the P10 itself is great design or not and/or sell in quantity is a question of opinion and time.
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