Apple Inc. Needs Growth In China: Is The iPhone 8 The Answer?

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Apple had a blockbuster year with the iPhone 6 in China but has struggled with plunging iPhone sales there ever since. In fact, the iPhone 6 did so well that the company has quietly released an updated version of it for India and a few other emerging markets.

But what would it take to convince price-sensitive Chinese consumers to buy the newest (and most expensive) iPhone model? One well-known analyst thinks the iPhone 8 will be just the thing, and another says Apple needs China sales to grow in fiscal 2018 if it’s going to post strong iPhone unit growth for the year.

Apple brand remains strong

UBS analyst Steven Milunovich said in a research note dated March 13 that his global iPhone review indicates that the Apple brand remains strong. Based on Gartner smartphone sell-through data, the premium end of the market returned to growth in December, reaching a 6% year over year increase. Apple outperformed in all geographic areas except China to take one point of share around the globe.

After a rocky 2016, there are questions about whether the iPhone maker can ever return to growth in the market. Domestic brands Oppo and Vivo took bites out of its double-digit share there, even though they’re probably not addressing the same set of customers. Milunovich said that in order for Apple to reach a 12% increase in iPhone units in fiscal 2018, the company will have to return to double-digit growth in China.

Recovery needed in China

He adds that this past year, the company did reach its highest market share in four years in the U.S., Europe, Japan and the rest of the world, while its share in China fell 17 points on the back of a 19% decline in units. Mainland China was better, with a 5% decline excluding Hong Kong and Taiwan. That’s also a vast improvement from the 31% decline in the September quarter.

Oppo, Vivo and Huawei  now hold 45% of smartphone sales in China, and Milunovich believes that most of those sales are in Tier 3 and 4 cities, as the company doesn’t have much of a presence in those areas.

iPhone 8 could beat Samsung Galaxy S8

Meanwhile, KGI Securities analyst Ming-Chi Kuo believes that the iPhone 8 has the potential to beat the Galaxy S8 because the S8 “lacks sufficiently attractive selling points.” In a research note over the weekend, he said he expects Samsung to ship 40 million to 50 million Galaxy S8 units in fiscal 2017, a decline from the 52 million Galaxy S7 units shipped last year, although he said this is because there’s a one-month difference in the sales period, reports 9to5Mac. Also Samsung had only one flagship, the Galaxy S7, because the Note 7 went down in flames, literally.

Kuo is still assuming that the iPhone 8 will have an OLED display, although that rumor has been called into question recently. He also expects the iPhone to have wireless charging and augmented reality features. In comparison, the analyst feels that about the only strong enough feature of the Galaxy S8 will be the rumored full-screen design.

Shares of Apple stock edged higher by as much as 0.09% to $139.27 during regular trading hours on Monday.

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