Morgan Stanley: iPhone Outperforms in China, App Store Growth Slows

“As of May 2022, Apple posted its 21st consecutive month of Y/Y IB share gains in China.” — Analyst Erik Woodring

From a note to clients that landed in my inbox Wednesday:

Latest China smartphone shipment data shows continued iPhone outperformance. According to the latest disclosures from the CAICT, total smartphone shipments in China in May were 20.6M units, down 9% Y/Y (Exhibit 20). This was a notable acceleration from 34% Y/Y shipment declines in the month of April, as China lockdowns eased and pent-up demand was met. Overall, May smartphone shipments in China were 14 points ahead of normal seasonality (+16% M/M vs. pre-COVID seasonality of +2% Y/Y), a rebound from sub-seasonal growth in April (-16% M/M vs. pre-COVID seasonality of +15% Y/Y). Our estimates would suggest that May iPhone shipments in China were 4.2M units, up 14% Y/Y (off a +35% Y/Y growth compare), while shipments for domestic Chinese smartphone vendors were down 13% Y/Y (Exhibit 21), indicating iPhone share gains in May. Quarter to date through the end of May, iPhone shipments in China are down 9% Y/Y vs. domestic Chinese vendors down 25% Y/Y.

We see these same share shifts playing out through our Jiguang China smartphone installed base data, where, as of May 2022, Apple posted its 21st consecutive month of Y/Y IB share gains in China (up ~220 bps Y/Y to 22.7% share) (Exhibit 17). Conversely, Huawei lost ~120 bps, Vivo lost ~60 bps, and Oppo lost ~30 bps of share Y/Y, while Xiaomi gained ~10 bps. Additionally, Apple’s retention rate of upgraders in China increased 70 bps M/M to 73%, while Huawei-to-Apple switching rates increased 90 bps M/M to 24.6%, showing Apple continues to gain switchers from Huawei. Net, these strong May iPhone results help make up for the weakness in April and reflect the fact that Apple is the most sought after premium smartphone brand in China.

Maintains Overweight rating and $185 price target. 

Cue Exhibit 17:

My take: Apparently I missed the announcement that Katy Huberty has moved into a management role. According to Morgan Stanley, “she is still involved with Apple coverage as it transitions over to Erik.”


  1. Bruce Oran said:
    Katy Huberty NOT COVERING APPLE! “Say it ain’t so, say it ain’t so”…Phil!

    June 22, 2022
  2. Robert Paul Leitao said:
    At least Apple 3.0 AMA special guests Dan Ives and Gene Munster continue to cover the company. If Katy moves on to a management role, all the more reason for readers to invest in an Apple 3.0 subscription. The good stuff gets covered here and in the Apple 3.0 Slack group available exclusively to subscribers.

    June 22, 2022
    • Hugh Lovell said:
      Thank you, Robert, for the work you put in on the Slack channel. I see posts almost every day from you. I also appreciate your analysis and am grateful for the times you have answered my questions.

      June 22, 2022
      • Robert Paul Leitao said:
        Hugh: Thank you for your kind words.

        June 23, 2022

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