Home Technology Apple Inc. Going Strong In China Despite iPhone Order Cuts

Apple Inc. Going Strong In China Despite iPhone Order Cuts

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Apple’s supply chain weakness has dominated headlines about the iPhone maker, but other data points indicate strength in China, which is seen as the next frontier for U.S.-based companies looking for expansion opportunities because of its sheer size. It looks like Chinese consumers are happily gobbling up new iPhones—even if they have purchased one within the last 12 months.

Survey demonstrates Apple’s popularity in China

Bank of America Merrill Lynch analyst Wamsi Mohan and team recently conducted a survey of more than 1,000 Chinese consumers from all age groups and income levels and from Tier 1 to Tier 4 cities. They found that Apple’s iPhone is the most popular smartphone among respondents and that intentions to buy a new iPhone within the next year are quite high.

Based on the results of their survey, they expect Apple to gain share in China, and in addition to the U.S.-based firm, they also found that domestic rival Huawei may be gaining market share against fellow domestic smartphone maker Xiaomi and Korean rival Samsung. BAML found that Huawei is neck and neck with Samsung at 22% of the Chinese smartphone market while 16% have Xiaomi smartphones.

Further, brand loyalty isn’t particularly significant in China as 19% of current iPhone owners are planning to buy another brand next time.


High iPhone purchase intentions

The BAML team found that of the survey respondents who purchased a smartphone less than a year ago, 55% said they are planning to buy a new phone sometime within the next year. Also one-third of them are planning to purchase a new phone in the next one to two years. Among iPhone users, 40% who bought their iPhones less than a year ago are planning to buy a new phone. Also 54% of that group plan to buy a new iPhone within the next year.


Further, of current iPhone users, almost half are planning to purchase another iPhone within the next 12 months.

Apple might benefit from iPhone 6c

Indeed, it looks like smartphone cycles are significantly shorter in China compared to the U.S., based on BAML’s user base. The results also highlight just how loyal Apple users are and that the premium pricing of the iPhone doesn’t matter much for most Chinese consumers.


However, while these percentages indicate that demand for the newest models remains strong, the BAML team suggests that Apple could benefit from the release of the rumored iPhone 6c, which is said to be a refreshed less expensive iPhone following the release of the iPhone 5c in 2013. The analysts base this deduction on the price ranges given by the survey respondents.

Apple is rumored to be planning to release the so-called iPhone 6c at some point before the release of the iPhone 7 in the fall, possibly as early as the second quarter.

Still room for iPads to grow in China

Another area of concern for investors has been iPad demand as Apple has struggled with waning tablet sales for quite some time. The replacement cycle on tablets is longer than it is for smartphones, and as of yet, the larger iPad Pro doesn’t appear to be having a significant impact on tablet sales for the California-based company.

However, BAML’s survey indicates that Apple could have significant opportunities to boost iPad sales by spurring adoption in China. The firm’s analysts report that the tablet market doesn’t appear to be saturated there yet as currently 38% of respondents don’t have a tablet. Only 1% of them don’t have a smartphone, indicating that the smartphone market is already saturated in China.


The analysts also report that Apple dominates the tablet market in China with 55% of Chinese tablet owners having an iPad. Also 7% of survey respondents are planning to purchase an iPad within the next year.

Apple’s ecosystem remains sticky

Despite the overall lack of brand loyalty in China, BAML’s survey also found that 40% of iPhone owners also have an iPad, making the iOS ecosystem sticky and robust. The analysts report that 24% of respondents have an iPhone. Further, 41% of iPad owners—which is 34% of total respondents—have an iPhone in addition to an iPad.

Shares of Apple climbed by as much as 1.11% to $99.63 per share, closing in on the $100 level they haven’t hit for several days.

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