The iPhone X Is Showing Signs Of Bringing The China Market Back For Apple

21 Dec The iPhone X Is Showing Signs Of Bringing The China Market Back For Apple

Apple has high hopes for the Chinese market and has been working hard to win hearts and minds in that country for a few years now. China is the largest mobile phone market in the world, and Apple’s second largest market.

But the American tech giant has hit some big speed bumps in China. The China market contributed 20% of Apple’s total sales ($44.8 billion) in fiscal 2017, down from 22% in 2016. The main reason for that is Chinese consumers have been choosing less expensive smartphones—from companies like Oppo and Huawei—over recent iPhones.

The iPhone X, however, is showing  signs of turning that situation around. One analyst, Katy Huberty of Morgan Stanley, says the numbers show that the iPhone X has come out of the gates far faster than earlier models, including the iPhone 8 and iPhone Plus.

Citing mobile messaging data, Morgan Stanley writes in a research note that after 16 days of availability, the iPhone X already accounts for 0.36% of all mobile devices in use in China.

Huberty adds: “Importantly, the data through November 19 only contains 16 days of iPhone X availability, whereas the comparable period for the iPhone 8 and 8 Plus includes a full 28 days. As a result, we expect further acceleration of iPhone X relative to iPhone 8/8 Plus in the next data release.”

The supply of the iPhone X only recently caught up with demand, which led some analysts to believe that demand is lower than expected. But a recent RBC Capital Markets iPhone demand survey suggests otherwise, showing that 62% of respondents in China are interested in buying an iPhone X (compared with just 28% of respondents in its U.S. survey).

Morgan Stanley’s Huberty also believes there is plenty of pent-up demand among owners of older iPhones, like the iPhone 6 and 6s. She points out that many of the first wave of iPhone X buyers upgraded from the iPhone 7 and iPhone 7 Plus, suggesting that these were loyalist enthusiasts who want to have the very latest iPhone–and right now. That leaves a high number of people who still own older iPhones and may decide to go for the X in the coming months.

The larger message here–both in China and the U.S.–is that many consumers are okay with paying $1,000 or more for a premium smartphone. The iPhone X starts at $999 for the 64 GB version, and goes to $1,149 for the 256 GB version.

It also suggests that people are willing to pay a premium for an iPhone that breaks away from the gradual upgrade path followed by generations of earlier iPhones–including the iPhone 8 and 8 Plus–and that offers features that are both cool and totally new to the device. The edge-to-edge OLED display and a facial recognition system are examples.

We’ll know a lot more about the China situation when Apple reports earnings for the holiday quarter January 30, 2018.

Source: Fast Company