Approximately a month after the release of Apple’s latest iPhone models, analysts and investors are beginning to detect signs of reduced demand in China compared to the previous year’s models.
According to an estimate by Counterpoint Research, sales of Apple’s iPhone 15 models during their first 17 days in China have declined by 4.5% compared to the previous year. The estimate also indicates that unit sales of the higher-end Pro Max and Pro models have decreased by 14% and 11%, respectively, compared to the previous year.
Wall Street analysts are also pointing to shorter shipping times on Apple’s website, which may suggest a decrease in demand or a significant increase in supply. Jeffries analysts have mentioned “weak demand” in China, leading to Apple losing its top spot in smartphone market share in the country.
China represents Apple’s third-largest market, following North America and Europe. The apparent slow start comes after several news stories that have raised concerns about Apple’s prospects in the Chinese market.
Huawei has reentered the high-end smartphone market in China after a period of relative absence, largely due to U.S. trade restrictions affecting the supply of essential phone components.
In recent news, some Chinese government agencies reportedly banned the use of iPhones for official work, raising questions about Apple’s brand image in the country.
Apple CEO Tim Cook is currently visiting China, marking his second visit this year. During his trip, Cook is visiting Apple stores, meeting with suppliers, and holding discussions with Chinese officials. Additionally, Apple has released a new iPad model specifically designed for China to work with the country’s carriers.
The global smartphone market is currently facing challenges, with sales down worldwide and a particularly noticeable decline in China due to macroeconomic concerns.
Jeff Fieldhack, research director at Counterpoint, noted, “Apple, we suspect, could be down five-ish percent — and the China market is down at least 5%. It’s basically holding serve in a down market.” He emphasized that strong demand in the U.S., as per Counterpoint’s data, is helping offset some of the decline in China.
Investors are eagerly awaiting Apple’s performance in the holiday season, which follows three consecutive quarters of declining overall sales. Data from Apple in July already indicated slowing growth in the quarter ending September 30.
Apple is set to reveal its September quarter results on November 2, with executives expected to provide insights into how the holiday quarter is shaping up and whether growth is returning. The holiday season is crucial for Apple, and it includes the first full quarter of iPhone 15 sales, as the September quarter only featured a few days of sales for the latest models.
Analysts often analyze shipping times on Apple’s website to gauge demand. Recent analyst notes from UBS, JPMorgan, and Bank of America indicate that these wait times are generally lower than they were a year ago, especially in China. Bank of America analysts suggest that the shorter shipping times primarily reflect improved supply rather than declining demand.
However, Morgan Stanley analyst Erik Woodring holds a different view. The bank is lowering its December quarter estimates and target price for Apple’s stock, believing that limited supply will push some iPhone sales into the first quarter of 2024.
Investor concerns are exacerbated by the belief that Apple’s other product categories may not be able to compensate for any potential iPhone sales shortfall. Apple’s Mac and iPad lineups have not received significant updates this year, and the recently announced Chinese iPad was a minor update.
One significant event to watch for Apple’s performance in China is “Singles’ Day,” a major shopping holiday taking place on November 11. iPhones are likely to be slightly discounted during this event to boost sales and provide insights into demand.
