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Unpacking Apple’s iPhone Shipment Decline in China: A Market Digestion, Not Doom and Gloom

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Rostov on don Russia February 3 20

The China Conundrum

In the bustling arena of China’s smartphone market, Apple Inc finds itself grappling with a formidable challenge as iPhone shipments see a sharp decline.

The Hard Numbers

Recent data for February paints a troubling picture, with shipments plunging by -33% year-on-year (y/y) and a staggering -56% month-on-month (m/m).

Market Landscape

This decline, far surpassing the usual seasonal norms of -20% m/m, reflects a tough terrain for the tech titan.

The Analyst’s Lens

Related: Apple’s iPhone Sales Faces Sharp Decline in China Amid Rising Competition

As investors delve into the repercussions of this downturn, fundamental questions emerge about Apple’s stronghold in this critical market. Analysts are also abuzz, dissecting the situation and proffering their insights.

The Apple Analyst: JPMorgan analyst Samik Chatterjee shared his perspective. Chatterjee maintains an Overweight rating on the stock.

The Fundamental View: Despite the stark numbers, a closer analysis unveiled subtleties that mitigate immediate concerns. While iPhone shipments did take a hit, mirroring a broader -33% y/y and -55% m/m dip in local mobile phone shipments, the crux seemed to lie in inventory adjustments rather than a fundamental shift in market dynamics.

Chatterjee’s assessment offered a balanced view of the situation. He posited that while the decline was noteworthy, it could signify a phase of market digestion rather than an irrevocable loss of market share.

The Inventory Insight

Image Source: JPMorgan Analyst Note

Drawing parallels between the drop in iPhone shipments and the broader decrease in local mobile phone shipments (see chart above), Chatterjee highlighted that inventory adjustments within the market might be skewing these figures more than changes in consumer preferences.

While immediate worries about market share could ease, the sustainability of a potential market recovery remained ambiguous, cautioned Chatterjee.

However, looking beyond such obstacles, Chatterjee maintained faith in Apple’s resilience. He emphasized the company’s track record of innovation and adaptability, indicating that it had weathered similar storms in the past. This resilience, he argued, positioned Apple favorably to navigate the current market turbulence.

Apple’s market share, especially in face of local competitors like Huawei, seemed relatively intact upon closer scrutiny. Data suggested that the drop in iPhone shipments might mirror channel inventory levels rather than ceding competitive ground to domestic players.

Nonetheless, this data urges prudence. While initial fears about market share may dissipate, the sustainability of any sequential market recovery remained uncertain.

AAPL Price Action: Apple stock was trading up 1.53% at $172.31 upon publication on Wednesday.

Read Next: Semiconductor Stocks Turn Volatile As China Changes Guidelines: Here Are The Key Players

Photo: Shutterstock

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