It was just about a year ago that iPhone maker Apple has issued a warning to investors about a a serious slow down in its business in China. A year later, that very market is apparently demanding more of the iPhones.
According to an investor note from Wedbush analyst Dan Ives, there was an 18 per cent year on year increase in the sale of iPhones in China in December which was better than what analysts had been expecting form the company. Citing data from the China Academy of Information and Communication Technology, Ives reported that compared to 2.7 million in December 2018, Apple shipped around 3.2 million iPhones to China in the month of December.
The sale of iPhones in China had drop sharply last year and therefore this growth in demand is welcome news for the company.
“Our belief that China will continue this positive upward trajectory with renewed growth and share gains on the heels of an iPhone 11 product cycle which the skeptics continue to underestimate,” Ives said in the note.
The stocks of Apple also reflected the good news with a 2 per cent jump =- taking the stocks to a record high.
Outside of the US, China is the largest market for Apple accounting for 157 per cent of the total sales of the company. On the other hand iPhones accounts for the largest profit margins for the company.
The situation about a year ago was however very different when a letter to investors was written by Apple CEO Tim Cook in which he warned of possible drop in sale in the holiday quarter primarily because of a drop in iPhone sale in China compared to the expectations of the company. That was a very unexpected announcement from Apple because that was its first quarterly revenue warning since June 2002. There was a 15 per cent drop in iPhone sale in the quarter as was revealed in the quarterly report of the company later in January.
Slower growth in the Chinese economy and the US-China trade war were among the major factors for the decline. And that trend sustained for Apple throughout most of 2019.
Again in April of last year, Apple announced a 17 per cent drop in the sale of iPhones for first three months of 2019 compared to the same period a year ago. The reason this time too was because of a slowness in demand in China.
But things changes since apple launched the iPhone 11 in September, Ives said, because of its features such as better camera technology and battery life which was combined with a lower-than-expected price tag. That helped increase demand for the iPhones in China.
There was strong early demand for the iPhone 11 which prompted Tim Cook to note growing better prospects in China during Apple’s October earnings call.
“Many investors are asking us: Is all the good news baked into shares after an historic upward move over the last year?” Ives said in the note. “The answer from our vantage point is a resounding NO, as we view [this as] only the first part of this massive upgrade opportunity.”
(Adapted from CNN.com)