Smartphones Versus iPhone, Revisited

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CNBC: While Smartphone Sales Drop in China, iPhone May Escape Unscathed

08 APRIL 2022 - Smartphone sales look ready to tank in China - iPhone not included. That seems to be the thinking of a number of analysts in a piece from CNBC. A resurgence of COVID-19 and associated lockdowns to slow it are kind of bumming out Chinese consumers. Or - said more formally - IDC research manager Will Wong tells CNBC:

The impact is expected to be mainly coming from the soft consumer demand and sentiment caused by the Covid outbreak and slower economic momentum… The supply disruptions will be a less disturbing factor as the factory bubbles and the government’s experience in curbing the outbreak could help to mitigate the impact.

So the problem won’t be supply but demand - again, iPhone not included. Probably. Wong says it’s weaker demand in the Android market that’ll drive smartphone sales in China down. The piece has Strategy Analytics executive director Neil Mawston agreeing on the Android front. He tells CNBC: 

The Android segment in China remains a brutal marketplace, with half-a-dozen brands (like Xiaomi) fighting fiercely on price for a piece of a shrinking Android pie…

While most of the analysts with whom CNBC spoke see iPhone not getting hit as hard, it will get hit… unless it doesn’t. For the Chinese smartphone market as a whole, Counterpoint Research analyst Neil Shah says the drop could be anywhere from 3% to 12%, depending how COVID goes. Focusing in on iPhone, Counterpoint’s Shah said “that Apple could see a decline of around 4% to 5% in shipments in the second quarter,” though he attributes that to the usual, seasonal decline that comes after Apple introduces new products. That said, CNBC has Strategy Analytics’ Mawston indicating that he “expects Apple to actually grow its overall market share in China in 2022 ‘as its loyal, affluent fans upgrade to new or more affordable 5G models.’”

JP Morgan: Apple Won’t Escape Consumer Uncertainty Totally Unscathed

What’s interesting is, while a bunch of people following the decline in sales of electronics think iPhone is likely to do well, one guy who follows Apple is cutting iPhone expectations based on that decline. Apple Insider has JP Morgan analyst Samik Chatterjee drawing down his iPhone expectations as his firm takes “a more cautious view on consumer spending…” Quoting his note:

…we are trimming our earnings forecasts for Apple, led by a modest haircut to our revenue growth estimates for iPhone (primarily iPhone SE) and Services, although the overall reduction in estimates is fairly modest given the resilience of high-end smartphones, tablets and laptops to the broader slowdown in consumer spending…

Ah. That would be the global version of Apple’s “loyal, affluent fans” mentioned by Mr. Mawston. “Despite the headwinds” in iPhone and perhaps in Services, Apple Insider says:

…Chatterjee still believes that Apple "should drive offsets through market share increases." He says Apple is (…) well-positioned to (…) deliver resilient performance in product revenue growth because of market share gains.

Chatterjee has a positive rating on Apple shares. His price target on the shares is $210.