On Friday morning, a large number of shoppers headed to the renowned Apple store in the center of Beijing in order to purchase the iPhone 15.At 10 a.m. Beijing time, JD's Dada one-hour delivery service reported a 253% increase in iPhone 15 orders compared to sales of the iPhone 14 this time last year.Although Counterpoint Research has projected the lowest potential for Apple in China with a 4% drop in shipments year-on-year for the fourth quarter, the high demand for the iPhone 15 is promising.
On Friday morning, the downtown Beijing Apple Store experienced a surge of customers purchasing the newest iPhone, despite fears that patriotism would negatively influence the company's sales. Through the JD's Dada one-hour delivery system, sales of the iPhone 15 skyrocketed 253% compared to the iPhone 14 in 2020. After deliveries began at 8 a.m. the company reported 25,000 phone deliveries within the first 10 minutes. Moreover, there was an increase from 500 authorized Apple retailers in 2020 to 4,600 this year.
On Friday, Apple began delivering the iPhone 15 after accepting pre-orders since Sept. 15. Despite experiencing economic and political challenges in its third-most important market, the tech titan went ahead with its launch event earlier this month. Close to the same time, Chinese telecom giant Huawei rolled out the Mate 60 Pro in China, a model with a supposedly 5G-compatible chip from SMIC - notwithstanding that the U.S. imposed sanctions on Huawei in 2019 which have severely diminished its phone business.
Despite the enthusiasm surrounding the launch of Apple’s new phone, those waiting in line at the store seemed ambivalent. One individual, Zhao, had originally planned to purchase the Huawei's latest phone, but missed the opportunity to buy it online. He then said in Mandarin, with CNBC translating, “I couldn't get the Mate 60, so I decided to buy the new iPhone. I don't think there's much difference.”
Zhao refused to give his full name because of the protected nature of the information. He was the 10th individual in the line at the Apple store in Sanlitun, Beijing, having arrived at 6:30 a.m. However, the first person in line, who has chosen to remain anonymous as well, told them they'd been there since 1 a.m. According to Zhao, Huawei's phone might slow down after about two to three years, while Apple may remain faster for four to five years. "However," Zhao stated, "I'm going to get a new phone in two to three years, so it's about equal to me." When asked about his opinion on buying one or the other for patriotic reasons, Zhao responded with "Don't Huawei and Apple pay taxes in China? Apple likely pays more.” Zhao is planning on purchasing the iPhone 15 Pro Max, with a list price of 9,999 yuan ($1,370).
In early September, The Wall Street Journal, citing sources familiar with the matter, reported that there had been an order forbidding central government personnel from bringing iPhones to the office or utilizing them for work. It was unclear as to the magnitude and scope of such an order. Bloomberg, citing sources familiar with the situation, suggested that the ban on iPhones being used at work might spread to other state-affiliated agencies. China's Ministry of Foreign Affairs, however, declared that the nation had not issued a prohibition on the acquisition or usage of Apple iPhones.
Apple has not made any immediate reply to CNBC's inquiry on the news article or the sales status of its iPhone 15 in China. The major American firm by market capitalization has seen its stock plummet about 7% till now this month.
Pre-sales of the iPhone 15 in China indicate robust demand. Checks of JD.com and Alibaba's Tmall earlier this week showed that the pricier iPhone 15 Pro and Pro Max were virtually sold out, with expected delivery wait times of at least a month. Will Wong, senior researcher at IDC, commented that despite the competition from Huawei's new products and the loss of the traditional high-profile promotion on Chinese social media, Apple will remain competitive in sales. He predicts a 5%-6% year-over-year increase in Apple's shipment in China during the second half of 2021, although pre-order numbers do not necessarily reflect the final sales figure, and last year the country was still struggling with Covid-19.
Consumers living in regions other than major cities such as Beijing, Shanghai and Hangzhou had a high demand for the new iPhone. Data from Dada shows that orders from less developed cities increased six times compared to the previous year.
China is instrumental for Apple's success, making up close to 20% of their total revenue. Its Greater China net sales rose 8% year-over-year to $15.76 billion during their second quarter, while their Americas market dropped 5.6% to $35.38 billion. This has been despite grim economic data showing a slower growth. China's retail sales rose 4.6% in August year-on-year after a 2.5% growth in July. The Chinese market is competitive, with Huawei launching a product on Monday and foldables becoming increasingly popular. As yet, Apple has not tapped into this market.
CNBC Pro is providing more information on China's increasing use of AI applications and how that is influencing monetization. Despite reports of a Chinese economic slowdown, there are three Chinese companies making large profits on a global level. Goldman Sachs has identified its favorite sector of Chinese tech, and has placed two stocks on its conviction list. HSBC has suggested six Chinese tech stocks to purchase currently, one of which offers potential investors over 50% upside.
China's utilization of AI is set to arrive — areas where it could promote monetization remain undeterred by an economic slowdown. Goldman Sachs has unveiled its "most preferred" sector in Chinese technology and has revealed two holdings for their conviction list; HSBC, on the other hand, has highlighted six "good value" Chinese tech stocks to buy, with one offering potential investors over 50% upside.
Counterpoint Research's outlook for Apple in China is positive, though with its most ambitious prediction forecasting a 4% year-on-year dip in iPhone shipments in the fourth quarter and its gloomiest outlook suggesting a 15% year-on-year fall.Tarun Pathak, research director at Counterpoint Technology Market Research, expressed in an email Wednesday that "supply constraints particularly for the Pro series could be seen in longer delivery times for pre-orders over the past two days." He further commented that should these supply issues remain unresolved, the firm would have to assume a more bearish attitude.
Pathak observed that Huawei's diminishing presence enabled the iPhone to gain a substantial amount of patrons in the range of $600 and up, and commented that those who have the iPhone 11 and iPhone 12 will likely upgrade to the iPhone 15. Pre-orders from JD.com for the iPhone 15 have surpasssed 3 million units, although JD.com did not respond to CNBC's request for comment when contacted. Despite this, analysis from Shanghai-based CINNO Research as of Wednesday showed that overall sales of the iPhone 15 has dropped by 22% compared to the iPhone 14 in China, at approximately 10 million units. This brings the anticipated total of iPhones sold in China to 45.5 million, 2% less than a year ago. CINNO attributes this to the economic downturn resulting from Huawei's Mate 60 Pro. It is undoubted that the new Mate 60 series will be a problem for the iPhone this year, as noted by Pathak from Counterpoint Research. -- CNBC's Eunice Yoon passed the word along for this report.
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