Mliunovich: iPhone 7 strong in U.S., soft in China

Results from the largest smartphone survey on Wall Street.

In a note to clients Tuesday, analyst Steve Milunovich shared the results of UBS' semi-annual Evidence Lab Global Smartphone Survey. Reaching nearly 6,500 consumers in five countries the survey is, according to Milunovich, the largest on the Street.

The news is the relative interest in the iPhone 7 in the U.S. and China: The nut graph:

Survey finds US interest in the iPhone 7 not only above the 6s but better than the iPhone 6 two years ago. iPhone 7 interest in China, however, appears lower than for the 6s. Overall iOS retention rates remain above Android, supporting net switchers to Apple, but retention was down in China. Apple remains a top-rated vendor by its user base in terms of quality, uniqueness, premium image, and brand commitment despite a slight decline from March. Purchase intentions for the next six months increased from our last survey, confirming near-term demand strength. Purchase intentions 7-12 months out declined, potentially signalling weaker demand in F2H/17. By that time, investors should be pricing in the next cycle.

Positives for Apple include:

  • almost half of US respondents are very or somewhat likely to purchase an iPhone 7, above even the 6 cycle two years ago
  • the US shows  a shift toward the Plus with a 9-point rise over the 6s
  • Apple rates high in product uniqueness, and its customers are more concerned with design and less focused on price
  • global smartphone penetration of 60% and high aspiration in the US and China allow opportunity for new customers
  • although Samsung's retention rate has improved, 30% of its customers were at least somewhat less likely to go Samsung.

Concerns for Apple include

  • Although China interest in the 7 is not far behind the US, it is lower than China saw for either the 6 or 6s
  • Apple's retention rate fell in China though excluding users not planning future upgrades the rate held in--we model a single-digit decline in China units for F17
  • upgrade cycles are slightly longer, reflected in our assumption that only 43% of the base upgrades in two years vs a more typical 50-60%
  • Apple fell in all categories of consumer perception.


  1. Fred Stein said:
    The one to watch is Huawei. They have a dual lens camera also.They’re smart, well capitalized and fierce. They compete globally.
    All the noise about Note 7 and Pixel matters less, and especially outside of the US. We don’t see Huawei here, because we (Senate hearings, etc.) make the US inhospitable for them.
    I’m not too worried about iPhone 7’s comparison to 6 and 6s in China. They were feeding into massive pent up demand. I am concerned about China’s economy. Per the WSJ, their total money supply has gone up 1100% since 2000.

    November 1, 2016
  2. Robert Paul Leitao said:
    A few observations:

    1. The UBS survey results echo the comments of management during last week’s conference call with analysts about the popularity of the iPhone 7 handsets and in particular the popularity of the iPhone 7 Plus which may remain supply constrained throughout the 14-week December quarter.

    2. For all of the concerns expressed about Greater China, in the fiscal year ended in September, Europe reemerged as Apple’s second-largest regional revenue segment. While many observers have cautioned about Apple’s performance in Greater China this fiscal year, little attention is paid to the prospects for revenue growth in Europe.

    Japan, which represented just under 8% of Apple’s reported revenue last fiscal year, may follow the Americas region and Europe in delivering YOY revenue growth this fiscal year.

    3. In my view, the survey results continue to validate Apple’s decision to use the iPhone form first introduced with the original iPhone 6 for a third consecutive model year. In the US, the company’s largest market, consumers see plenty of innovation packed into a familiar form.

    4. Although upgrade rates may lag for iPhone owners, it’s a testament to the quality of the products and doesn’t take into account the robust global market for pre-owned iPhones. More important than the number of iPhones sold in a particular quarter or particular year is the expansion of the company’s global customer base and the number of new participants in Apple’s expansive eco-system of devices, apps, content and services.

    November 2, 2016

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