UBS: Apple's dominance in China is over

Recently, UBS released a report saying that the price of the 5.8-inch iPhone X in 2018 will reach 1,099 yuan, which made many people unhappy. However, the bad news does not end there. UBS clearly pointed out in its second report that Apple's dominance in China has ended.

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Analyst Steven Milunovich said that because the iPhone 6/6 Plus had a new design, a larger screen and supported 4G, the iPhone's influence in China peaked in 2015, with shipments accounting for 25% of the entire Chinese smartphone market. But then it started to go downhill, and now the market share is only 19%. In the future, iPhone sales in China will remain flat, and in the long run, there will be very little growth.

UBS gave three reasons for the decline in iPhone market share:

First of all, Huawei has put a lot of pressure on Apple in the high-end market and the mid-range market where the iPhone 6s is located. Although the iPhone still has a dominant position in the ultra-high-end market, it still cannot avoid the overall shrinkage of Apple. And as the price of iPhone becomes higher and higher, fewer and fewer people can afford the new iPhone.

In 2015, we could have expected Apple to have a 40% to 50% share in the primary and secondary consumer markets (referring to the high-end market), but now that figure has dropped to 20% to 30%. As you can see, the total potential users of China's smartphone market is 1.3 billion, with a total of about 300 million users in the primary and secondary markets, so Apple has room to play between 150 million and 220 million people.

Secondly, Apple has always adopted the method of iterating old models for the low-end market. For example, the iPhone 8 now occupies the mainstream, and the 6s and 6 have become the main forces in the low-end market. However, UBS believes that Apple's strategy is meaningless in China's third- and fourth-tier cities because their sales system in these cities is very imperfect, and for these users, the functions of the old models are already too outdated.

Compared with the old iPhone, the new Android mid- and low-end models have bigger batteries, newer designs, better cameras… Obviously, Apple’s old models that are popular all over the world and occupy the low-end market do not apply to China. The figure below can reflect the tremendous pressure that Chinese brands have put on Apple and Samsung in recent years.

***, the generally slowing upgrade cycle of the smartphone market has also affected Apple. Now the replacement cycle of Chinese smartphone users is getting longer and longer, and Apple has to face this problem like other manufacturers.

In a previous report from Morgan Stanley, they pointed out that Apple has seen a slowdown in sales of devices such as the iPhone, and the company is turning to software and other service businesses to ensure revenue and profit growth, such as Apple Music, App Store, etc. According to forecasts, Apple's growth in 2018 will reach 2%.