iPhone X accelerates share gains in China

Morgan Stanley: This is the smartphone Chinese buyers have been waiting for.

From a note to clients by Katy Huberty that landed in my inbox Thursday:

We now have data through November 19 that bolsters our bullish China thesis. This additional data show that iPhone X adoption in China is on a faster pace than the iPhone 8 or 8 Plus. As Exhibit 2 depicts, iPhone X represented 0.36% of the iPhone installed base in China through November 19, higher than the initial adoption of the iPhone 8 or 8 Plus. Importantly, the data through November 19 only contains 16 days of iPhone X availability, whereas the comparable period for the iPhone 8 and 8 Plus includes a full 28 days. As a result, we expect further acceleration of iPhone X relative to iPhone 8/8 Plus in the next data release.

morgan stanley iphone x china

Click to enlarge.

More from Huberty:

The net switching rate to Apple, or percentage of non-iPhone smartphone owners that switched to an iPhone minus the percentage of iPhone owners that switched away to a different smartphone brand, accelerated 130bps [1.3%] in the four-week period ending November 19, to 9.2% (Exhibit 7).

iPhone x china switching

Still more:

Google Trends data corroborate bullish outlook for iPhone X in China. As you can see in Exhibit 10, weighted Google search trends by region point to higher searches for iPhone in China than any other region and an accelerating rate of searches in C4Q17, greater than the acceleration in 4Q14 after the iPhone 6 launch. While search data reflect interest, not necessarily purchases, the combination of strong searches and share gains within the active user base is bullish, in our view. We continue to believe that China will be the primary driver of iPhone growth in FY18 and model 74M iPhone shipments in FY18, up 80% Y/Y.

Morgan stanley china iphone x google search

Reiterates Overweight rating and $200 price target. Apple remains a Morgan Stanley “top pick.” 

My take: Huberty is the anti-Kvaal. Apple was up a buck and a quarter in midday trading Thursday.

2 Comments

  1. Jonathan Mackenzie said:
    This is good. Good analysis and good news for AAPL longs.

    I’m not saying the stock is impervious to a pullback, but as it plays out this China story may help counter the saturated market narrative.

    “What about China?” has been one of the recent reasons Apple is doomed, so I am going to enjoy listening to the next earnings call and then reading all the folks who believe every silver lining has a dark cloud.

    0
    December 22, 2017
  2. Robert Paul Leitao said:
    Not only is the iPhone X performing well in Greater China during the December quarter which ends in less than 10 days, the latest Apple handsets will continue to perform well in the upcoming March quarter. The region’s Lunar New Year celebrations commence in February.

    The iPhone X represents the first major change to the iPhone’s form since the release of the original iPhone 6 series handsets three years ago. In FY2015, revenue in the Greater China regional revenue segment rose 85% year-over-year powered by the appeal of Apple’s first larger-screen iPhones.

    Since the record for the region’s revenue of $58.715 billion was set in FY2015, the Greater China regional revenue segment has experienced declining revenue over the most recent two fiscal years. In FY2017, reported revenue from the region was $42.352 billion dollars.

    FY2018 will undoubtedly see year-over-year revenue growth in the region in response to high demand for the iPhone X as well as higher ASPs across the iPhone line as consumers opt for larger storage options.

    Pent-up demand for the iPhone X, the first conspicuous change to the iPhone’s form in three years, may catapult the region’s revenue beyond that of the Europe regional revenue segment in FY2018 with strong interest in Apple’s flagship iPhone handsets continuing in Greater China well into FY2019.

    0
    December 22, 2017

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