- iOS market share in China has accelerated ever since the launch of iPhone 6.
- Apple topped Chinese smartphone shipments in Q4, and continued to gain market share in January, implying strong growth in Q2 2015 iPhone sales.
- China’s growing contribution to Apple revenue coupled with increasing shipments and market share will largely drive Apple growth in Q2 2015.
Apple (NASDAQ:AAPL) made its way up to the peak of Mount Technology embracing disruptive innovations rather than incremental innovations. The Mac, iPod, iPhone and iPad, each stood out for disrupting industries and beginning new trends and benchmarks. The iPhone 6 is Apple’s odd man out, fitting the bill of an incremental innovation. However, Apple seems to have played its latest card with its flair of the past and iPhone 6 has turned out to be yet another masterstroke, which came at a time many were questioning innovation at the Cupertino based tech giant.
The launch of the latest iPhone models has fuelled a significant increase in Apple’s smartphone OS market share across most major global markets. The growth was partly driven by the timing of Apple’s entry into large screen devices. With smartphone sales growth skewed in favor of larger screen sizes, consumers were demanding a larger screen device and Apple responded with the iPhone 6.
China, with the largest smartphone user base in the world, would be a key piece of any device manufacturer’s plans. Based on the latest data from Kantar World Panel, China could well be the biggest piece of the Apple puzzle in Q2, as iOS market share in China has accelerated to scale newer heights over the last few months.
China: A Major Contributor To Apple Revenue
Driven by iPhone 6 availability from all three major Chinese carriers, Apple revenue from China jumped 70% YoY in the most recent quarter. The QoQ growth came in at a higher 156%.
China contributed 21.6% of Apple revenue in the three months ending December 2014, a significant increase from 16.5% of total revenue in the year ago quarter.
The blowout quarter was a result of Apple topping Chinese smartphone shipments in Q4 2014, beating the likes of Xiaomi, Huawei and Samsung. With Chinese customers clamoring for the iPhone 6 and 6 plus, an important question for the Apple investor is whether or not Apple can continue to ride the popularity of its latest iPhones. An answer of sorts is provided by the latest smartphone shipment and OS data from Kantar Worldpanel.
iOS Reaches highest Ever Smartphone OS Market Share In China
iOS market share in China rose for the third consecutive month following the launch of iPhone 6 in China. iOS market share rose to 25.4%, its highest levels ever in the country. iPhone 6 ended the three month ending January 2015 as the highest selling smartphone, making up 9.5% of total smartphone sales.
Macro-Economic Trends Favor iPhone In China
Apple is well on course to ride the three waves of Chinese smartphone replacement cycle, growing Chinese middle class and preference of Apple products among gifters. A more detailed explanation of these trends will follow in the coming week. These three trends in combination with an increasing preference among Chinese smartphone buyers to opt for larger screen phones can be viewed as the prime drivers of Apple growth.
In summary, the huge shipments of iPhones in China and highest ever iOS market share in China imply that Apple’s glory days in China are far from over. The 70% YoY growth in Greater China revenue was not a one-off event and can be expected to continue over the coming quarters.
In Conclusion, the growing popularity of iPhone, huge growth potential driven by Apple Pay and iWatch, large free cash flow margins and attractive valuations make Apple a stock to own. We re-iterate our bullish outlook on Apple stock, which is reflected in our Apple stock analysis.