Apple’s record quarter in China still seems very long.
According to Apple’s fourth-quarter report, sales in China soared 57% year-on-year to reach $21 billion, thanks to iPhone 12. The result was a big win for Apple, as revenue from China accounted for nearly 20% of the company’s sales for the quarter.
However, the reality shows that iPhone manufacturers are not always winning in the billion-population market. In mid-2018, analysts reduced their forecasts for global iPhone sales, arguing weak consumption in the Chinese market was the reason for this.
In January 2019, Apple itself warned investors that the fourth quarter of 2018’s sales may be lower than expected due to the effects of the US-China trade war.
Then, the COVID-19 pandemic began to break out in China in early 2020. This is the first place where Apple must learn to manage in the context of factories and App Store shutdown. In the fourth quarter of 2020, revenue from China accounted for nearly 20% of total revenue. Even so, analysts are still optimistic that Apple’s great performance in China in the past quarter is not unusual.
“China is like a thorn to Apple. And now, the pendulum has completely turned to the other sides“, Dan Morgan – senior portfolio manager at Synovus Trust Company said. “China is like a thorn to Apple. And now the pendulum has completely turned to the other side.”
China is the key market of Apple
Although sales in China have not always been stable in recent years, the country of billions remains an important market for Apple.
The country’s middle class is large and has a large spending power. The service mobile apps from shopping to banking are especially popular, and the Chinese use them fluently and familiarly. Most importantly, this huge market still has room for Apple to thrive. According to Gartner statistics, while Apple’s global smartphone market share in 2020 is 14.8%, in China this figure is only 10.1%. Here, Apple not only sold devices but also expected revenue for translation from the App Store.
Wedbush analyst Dan Ives stressed that China will account for about 20% of all upgraded iPhones next year. China remains “a key ingredient” in Apple’s success, he added.
In February, Apple CEO Tim Cook recently had an online chat with a senior student at Beijing University of Posts and Telecommunications He Shijie. This move is considered to attract young Chinese users. During the conversation, Tim Cook said, many features on Apple products inspired by Chinese users such as scanning QR codes, dark mode feature for iPhone.
“We listen closely to our customers in China, create new features and then apply them worldwide. We get a lot of feedback from China” Tim Cook said.
We listen carefully to our customers in China, create new features that are then rolled out around the world.
Record number of people upgrading
iPhone 12 is the flagship product, contributing significantly to sales growth in China last quarter, although Tim Cook emphasized that other products such as the iPad and wearable devices also play an important role.
Analysts reasoned, many users in other countries have delayed buying new iPhones for the past few years due to the ever longer lifecycle of smartphones and the lack of outstanding new features. By the time the iPhone 12 5G launches, many people are due to need an upgrade. This is why Apple’s new iPhone becomes expensive.
Besides, there are a number of reasons why the iPhone 12 has become particularly popular in China when there was a record number of upgrades during the holiday season.
The first is that 5G networks in China are much stronger than in other markets, so users have more incentive to upgrade. In the US, by contrast, users have to wait until 5G becomes more widely available.
“The process of building 5G networks is very active in China, while in the US things are not as committed” Mr. Morgan of Synovus said.
Gartner analyst Annette Zimmermann added that China’s economy is recovering faster from a pandemic recession than other countries. As a result, Chinese consumers have more cash to spend on new devices.
According to Gartner, the number of iPhones Apple sells in 2020 is 8% higher than the previous year.
“We will still see very positive growth over the next two quarters. There are a lot of users who still need to upgrade because of the 5G network” Mr. Zimmermann said.
Apple could also benefit from Huawei’s hardship because of the US government ban. Not only access to Google apps, but chip bans have left Huawei on the ground for the past two years.
According to data from IDC, Apple’s share of the Chinese smartphone market increased by nearly 5 percentage points in the fourth quarter of 2020, while Huawei fell more than 10 points.
Experts say, Apple’s strong growth in China will continue or not will depend in part on the prediction of the “super cycle upgrade iPhone 12” of the technology world.