Apple Inc. (Nasdaq: AAPL) investors have gotten some troubling shipment data out of China in 2017, but Morgan Stanley managing director Katy Huberty says the most important number to gauge Apple’s China success is trending in the right direction.
Apple has already secured a dominant share of the U.S. smartphone market, making the company’s overseas growth even more important.
Data from IDC indicates iPhones have represented 7.6 percent of smartphone shipments to China in 2017, down from 12 percent following the iPhone 6 launch in 2014. In 2016 Apple held 10.4 percent of the smartphone market share in China, trailing lower-cost manufacturers Huawei (16.4 percent), Oppo (15.5 percent), Vivo (13.9 percent) and Xiaomi (10.9 percent).
But Huberty says Apple has gained share when it comes to the total number of activated phones in China, a far more important statistic than total shipments. At first, the shipment data and activated phone data may seem contradictory, but there’s a simple explanation.
“In our view, Chinese-branded smartphones have a shorter replacement cycle versus Apple, suggesting they have to sell more phones to achieve the same share of activated smartphones,” Huberty says.
When Apple investors consider the iPhone’s presence in China, she says they should consider how many people own and use iPhones at any given time. By that measure, Morgan Stanley estimates Apple has gained 4 percent market share in 2017 and iPhones currently represent 19.5 percent of active smartphones in China. Not only is Apple gaining this important market share, it is outgaining all of the four largest domestic Chinese smartphone brands as well.
Huberty says Apple’s impressive China growth will soon start to accelerate further as the Chinese user base begins generating more Apple Services revenue as well.
“If we are correct, then we believe…
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