Here's Why Apple Could Overtake Samsung in China

Apple (NASDAQ: AAPL  ) has been on a tear since the newest iPhone lineup (5s and 5c) was announced in September, and the new iPad Air and Mini Retina models in October. Most analysts and research firms have issued reports pointing toward brisk sales of these products. Investors responded by boosting the stock's price to 52-week highs, although it has since retreated a bit.

A new report by Counterpoint Technology Research says that sales momentum is such, that:

This might allow Apple to even reach the No. 1 smartphone player in December or January in China. 

Apple battles against Google with their Android operating system, the leading provider of which is Samsung (NASDAQOTH: SSNLF  ) (NASDAQOTH: SSNLF  ) , whose flagship Galaxy S4 seems to be past its peak in popularity.

Globally
The report corroborates others (see here)

Apple's iPhone 5s continued to be the best-selling phone globally during October. iPhone 5s sales saw an upward sales momentum as Apple continued expansive roll-out for its flagship model thus further widening the gap with its arch rival's flagship model Samsung's Galaxy S4.

As the figure shows, Apple and Samsung shared the top 7 spots globally, with Nokia (NYSE: NOK  ) taking up 2 spots. (Counterpoint has just verified that the spot No. 9 is the S3 mini also by Samsung-not Nokia.) Interestingly, the Nokia phones are the only feature phones in the list. Nokia is selling its phone division to Microsoft (NASDAQ: MSFT  ) and its flagship smartphones now run Windows Phone 8. While the new line has put WP8 back in the ratings, so far Microsoft's share is still very small.

[Source: Counterpoint]

China
While Samsung continued as the top overall smartphone supplier in China, it should be remembered that they provide a wide variety of phone models, including many relatively cheap ones. In fact, not all their phones run Android. Some run Windows Phone 8. Additionally, the iPhone currently is not sold on China's largest telcom China Mobile, with 750 million customers. Rumors are that could change as early as Dec. 18.

Counterpoint suggests this release will likely instigate a price war among the carriers that will further boost iPhone sales. It has been suggested that China Mobile alone could add as many as 30 million new iPhone sales per year. This is why they speculate that Apple might rise to the number one smartphone supplier either this month or in January.

So far, they have jumped from about 2% in August to about 12% now. An enormous change, this now puts it into striking range of Samsung's approximately 18%.

[Source: Counterpoint]

In other breaking news, NPD just reported:

NPD just reported a [consumer electronics] sales increase of 10% for Thanksgiving week as interesting promotions, some solid category performances, and nice results from some mid-size categories helped propel results to a more than $400 million increase in revenue over the previous three years.

While the release highlighted that it was not only the tablet market that pushed sales figures, these were the largest drivers.

Conclusion
Apple's new products are certainly a success as the iPhone and iPads all are at the top of the charts. With this new availability in China we should see yet higher sales ahead. If they should bump Samsung in China, it would be viewed as very positive in a public relations sense and as a serious rejection of Google's Android.

I expect that there will also be an iPhone halo effect that will push sales of iPads and Macs in China as well. Last year Apple sold 48 million iPhones and 23 million iPads in the holiday quarter. They should eclipse those numbers, but by how much is still an open question. Whatever it is, it is sure to be good for the bottom line.

This new China Mobile deal is just in time for the upcoming Chinese New Year. I hope they have lots of the new gold colored models in stock.

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  • Report this Comment On December 13, 2013, at 7:50 AM, vernr75 wrote:

    It's just the usual yearly upgrade cycle spending spree by established iPhone users. Once that's over with, Apple's going right back down to 2% China market share. And China Mobile isn't going to be as fruitful as you imagine because their iPhones will be tied to expensive 4G plans and China Mobile's plan is to use iPhones with 4G to grab iPhone users from the two smaller networks.

  • Report this Comment On December 13, 2013, at 9:07 AM, twolf2919 wrote:

    @vernr75, that this is just 'the usual yearly upgrade cycle spending spree' is just nonsense. It may be a component of Apple's rise, but it's clearly not the the only reason - not even the most important one. Last year, after the introduction of the iPhone 5, Apple's share in China's smartphone market was 6.9% (according to the same organization, Counterpoint: http://www.globaltimes.cn/content/746116.shtml) - with this "upgrade cycle", Apple got to 12% - almost double. If it were the "usual" as you claim, one would expect a rise to 6%, not 12%.

    As far as how "fruitful" the CM deal is concerned: I don't think CM's main strategy is going to be poaching users from the other networks - as a recent article pointed out, China doesn't have phone number portability, so moving between carriers is a hassle. It is more likely that CM's strategy is to get its current 3G users - including the 10 million who are currently running jail-broken iPhones on CM's network - to get onto this new 4G network....and pay CM for these data services. About 170m of CM's 760m are candidates. If Apple can get a significant percentage of those to buy iPhones, we're looking at 17-30m additional sales (given the current 12% iPhone use in China, 20m additional sales seem a reasonable guess).

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