Apple's iPhone Faces a Thorny Path in China

The iPhone has lost its reign as the smartphone market leader in China, owing to its adversaries in the Android camp, in a narrative twist that may cause even the most ardent Apple devotee to pause. According to Jefferies analysts, the news is akin to a strong superhero being pushed from their pedestal by a squad of enemies.

According to these analysts, the Chinese smartphone market is prospering, with year-over-year growth fueled primarily by Android's supremacy. With double-digit solid growth, Huawei, Xiaomi, and Honor have led this rise. Meanwhile, Apple's iPhone is seeing a vast, double-digit fall, and year-over-year volume growth has been negative since the release of the iPhone 15. It is truly a remarkable sight to witness the crown of glory gradually slipping away from Apple's firm grip.

In this thrilling battle, Huawei has emerged victorious, capturing the coveted No. 1 market share position. In the context of the Chinese smartphone market, it's like witnessing the evil triumph over the hero.

According to Jefferies analysts, Apple's sluggish demand in China would eventually lead to lower-than-expected global shipments of the iPhone 15 in 2023. They are confident that the trend is clear: the iPhone will "lose" to Huawei next year. It's almost as if they've written the script for a fantastic underdog story with Huawei as the main character.

Even with such a significant shift in the pecking order, it's interesting to note that Apple's stock remained unchanged on the day of the news release. The financial markets seem unfazed by this change or perhaps they are eagerly awaiting what unfolds next in this captivating drama.
Jefferies analysts also deliver a bombshell: Android's leap in volume growth cannot be attributable to discounting. Surprisingly, iPhone discounts (excluding iPhone 15 models) have been consistent, although the average discount for Android smartphones "is not high." It's like learning that this story's narrative twists are anything but predictable.

Analysts suggest that resale iPhone 15 handsets are being sold at a discount as compared to official selling pricing, further stinging Apple. This highlights China's apparent disinterest in Apple products, portraying a scenario where the hero's once-gleaming armor has lost its luster and become tarnished and rusty.

As if this wasn't enough drama for one day, Morgan Stanley analysts expressed their doubts, lowering Apple's price estimate from $215 to $210. What are their concerns? Supply constraints. They also reduced their iPhone forecast for the quarter by a not-insignificant 8%. It's almost as if the hero's sidekicks have lost trust, and they, too, are becoming "more guarded" about the company's possibilities.

Morgan Stanley analysts announced that beginning in the September quarter, they would keep a close eye on Apple's total revenue, services revenue growth, gross margin, and revenue growth in China. Apple's projected performance for the upcoming December quarter has created quite a buzz among eager enthusiasts. There is genuine anticipation as people eagerly await to see how the company's fortunes will unfold, akin to the excitement of watching the next thrilling episode of a captivating TV series.

Meanwhile, Apple, the protagonist in this twisty play, has opted to remain silent, failing to react immediately to CNBC's request for comment. It's almost as if they're following in the footsteps of the stoic hero, refusing to accept loss and preparing for a return in the next episode of the story.

The war for domination in the Chinese smartphone industry continues, and the plot becomes more unexpected with each twist and turn. In this story of cell phones and market share, the only certainty is that more surprises are on the way.

Photo: DIW

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