Analyst: Apple Missed the Boat on Chinese Smartphone Sales


A number of mobile industry analysts have predicted that Apple’s (NASDAQ:AAPL) recently announced deal with China Mobile (NYSE:CHL) will add billions of dollars to the California-based company’s revenues and greatly expand its market share in the country. However, at least one analyst has taken a decidedly pessimistic outlook on Apple’s prospects in the world’s largest smartphone market. As reported by Barron’s, Wedge Partners analyst Jun Zhang recently cited China’s slowing 3G user growth as evidence of the country’s smartphone market “fatigue.”

“Average 3G user growth, which supports most smartphone sales, came down from 17-18 million per month in Q3 to 12.5-13 million per month in Q4,” wrote Zhang in a note to investors obtained by Barron’s. “Therefore, overall Q4 3G user growth will drop 26-28 percent QoQ from Q3.”

Zhang also noted a corresponding drop in smartphone sales. “We believe smartphone sell-through also dropped from 26-30 [million] per month in the August/September period to 20 million in October and 18-19 million in November,” said the Wedge Partners analyst. “Overall, smartphone sell-through will drop 25 percent QoQ in Q4, even with an expected slight rebound of smartphone sales in December.”

According to data from market research firm Counterpoint, Apple’s smartphone market share hit 12 percent in October, up from 3 percent in September. However, Zhang claimed that this was an anomaly in China’s overall declining smartphone sales.

“With slowing overall smartphone sales and the launch of Apple products in the latter part of September, it is not surprising that Apple’s market share increased in October,” wrote Zhang, via Barron’s. “We believe current iPhone 5s/5c sales are slowing down and the sale of iPhones in China were affected by slowing smartphone sell-through.”

Per Barron’s, Zhang also pointed out that both of Apple’s new iPhone models are slipping out of the top-selling smartphone sales lists in China. The “iPhone 5c was out of the top 20 smartphone sales list. iPhone 5s’s No.2 place was replaced by Xiaomi,” noted Zhang. “Xiaomi 3, Xiaomi Red and the latest launched Vivo 3 are among the top 5 smartphones on the sales list. No.3 is iPhone 5s.” Xiaomi is a privately owned Chinese company that makes low-end smartphones.

Although Zhang contends that China’s smartphone market is slowing down, it should be noted that many other industry watchers believe the country’s market is still growing. Market research firm IDC reported that the new 4G network and Apple’s distribution deal with China Mobile will likely push China’s smartphone shipments past 450 million in 2014.

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