Apple continues to see strong sales of the iPhone even several quarters after the release of the iPhone 6 and iPhone 6 Plus. In fact, sales of the smartphone show no sign of slowing down, particularly in China, the world’s biggest mobile market. It would see, the analysts who have voiced concerns about Apple’s reliance on the iPhone have little to complain about right now.
Apple could sell 51m units in June Q
In a report dated May 14, UBS analyst Steven Milunovich presented the latest data from the UBS Evidence Lab. He said their checks suggest Apple could sell as many as 51.1 million iPhones in the June quarter. That’s significantly ahead of the consensus estimate of approximately 45 million units, although the analyst said in the past, the Evidence Lab has been closer to predicting iPhone sales than Wall Street has been.
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The analyst noted that his iPhone Monitor tracks sell-through, however, while Apple reports sell-in. As a result, he adjusts for changes in channel inventory and supply problems that could result in a difference between what Apple reports and the demand suggested by the Monitor.
Milunovich also upped his sell-in estimate from 43 million iPhones to 48 million iPhones to reflect the greater than expected demand he’s seeing. As a result of the increase in iPhone unit sales, he also increased his earnings per share estimate for the 2015 fiscal year from $9.04 to $9.17 per share.
Strong iPhone numbers in China
Apple has taken strides to capture China in the global race to get a stranglehold on the world’s biggest smartphone market. Milunovich said his model looks at historical shipment data in 20 countries and areas and correlating with Google search values in an attempt to project demand in the near term.
He found 23% year over year growth in global search volume through May 2. Demand for the iPhone remains particularly strong in China, as he found a more than 100% increase in search volume there “using a bottom-up methodology.” He added that the model tends to place a bit too much weight on Greater China, as in the last quarter, his iPhone Monitor overestimated China’s contribution to search growth by approximately 9%. However, he also said that it has been “directionally correct.”
Why Apple will keep killing it in China for now
Analysts at CLSA also found continued strength in iPhone sales in China. In a pair of reports dated May 15, analysts Avi Silver and Chang Liu highlighted Apple’s growth verses the overall slowdown in smartphone growth in China. They highlighted several reasons to believe Apple has nowhere to go but up in China.
For example, they see the Apple brand continue to get stronger there and have found that Chinese consumers want to buy an iPhone because they see it as a status symbol. Further, China Mobile and other major mobile carriers in China are quickly building out their 4G infrastructures, which is good for Apple as the iPhone enables consumers to fully utilize 4G service. The CLSA team added that the most important reason might be the rising middle-upper income class appears to be pushing the high end of the smartphone market to over 23% of the overall smartphone mix.
Apple could hit 100m iPhones in China
The CLSA analysts said it’s possible Apple could grow its China iPhone volume to 100 million units in just the next two years. That would make China be 50% higher than Apple’s North America units, and it would mean that Apple would have a staggering 55% share of the high end of the smartphone market in China. They emphasized, however, that this is their most bullish case for Apple. Here’s a closer look at their bull and base cases for Apple based on the China numbers
They note that Apple saw iPhone volumes in China skyrocket 73% year over year to 13.5 million units in a quarter that had difficult comparisons because the iPhone launched on China Mobile in January 2014. They also said Apple gained the most market share during the March quarter of this year, climbing 430 basis points compared to last year.
Chinese competitors Xiaomi and Huawei only gained 226 basis points and 223 basis points respectively. “Emerging brands” Oppo gained 415 basis points and Vivo gained 345 basis points of market share, they noted. They also said that branded smartphones in China increased 17% year over year, with 35% of that being attributed to growth in the iPhone.
Chinese purchase intentions good for Apple
CLSA also pointed to a recent study from China Reality Research which indicated that 54% of participants plan to increase spending on consumer electronics. Of those respondents, 68% of them said they would buy Apple products, compared to only 16% for Samsung.
In the last 12 months, Apple sold about 36.5 million iPhones in China, and they are projecting about 48 million in the next 12 months, which would be a 31% growth rate.
The survey also indicated that 35% said they plan to buy an iPhone. The CLSA team noted that the survey covered 135 million Chinese retail investors. Thirty-five percent of that base would imply 47 million iPhones just to that demographic in China, which doesn’t include the other 1.2 billion Chinese. As a result, the CLSA analysts said there’s plenty of runway for growth for Apple in China.
All graphs and charts in this report are courtesy UBS or CLSA, as noted.