In the absence of 5G-enabled iPhones, Apple sales to struggle in Chinese markets
iPhone loyalist Zhang now has to make a major decision whether to go on using an iPhone, Apple’s flagship smartphone or move on to a smartphone from a Chinese brand. The deciding factor? 5G support.
Zhang, aged 25, owns an iPhone 7 Plus at the moment and is working for an overseas company in Shenzhen. He declared that he usually owned an iPhone product for around 2-3 years. However, if he upgraded to the iPhone 11 now, Apple’s latest launch, he wouldn’t be capable of using 5G services for 2-3 years, a dumb idea, considering everybody else would be utilizing 5G-enabled smartphones for their needs by then.
Other Chinese iPhone users are also faced with the same dilemma. This has dampened the outlook for the recently launched iPhone 11 models in Chinese markets. The iPhone 11 was launched on Tuesday by Apple in the US.
Apple has unveiled 3 upgraded models – the iPhone 11 Pro Mac, iPhone 11, and the iPhone 11 Pro- none of which come with 5G-support. iPhone 11’s prices begin at $699, around $50 lower than the iPhone XR. However, the most expensive, feature rich 512GB iPhone 11 Pro Max is priced at $1449, which happens to be one of the most top-notch and expensive smartphones on the markets.
Bryan Ma, VP at IDC stated that 4G-enabled iPhones do not have a good outlook in China as the Chinese smartphone industry prepares to roll out 5G technology in the next few months on an aggressive scale. This is enough to make iPhone fanboys think twice, causing them to delay upgrading until the following year, where they’ll hopefully be able to upgrade to a 5G-capable iPhone from Apple.
However, such reactions wouldn’t be good for the Chinese smartphone market that’s currently in decline as a result of growing channel inventories and longer replacement cycles.
Although recent 5G-capable Android smartphones & the launch of next-gen, ultra-fast mobile services indicate growth opportunities, there are many concerns regarding domestic consumption due to the escalating China-US trade war that has seen China’s economic growth levels fall to 6.2% in Q2, a record low for the country.
Even smartphone shipments in mainland China have fallen 6% to around 97.9M units in Q2, which is lower than the 104.2M units that were shipped last year, as per figures released by IDC, a research firm, last month.
Apple is planning to wait till 2020 until it starts offering iPhones, which are capable of connecting with 5G networks, as per a report from Bloomberg that was published in December. It cited people knowledgeable about Apple’s plans for the future.
Kiranjeet Kaur of IDC Asia-Pacific stated that as multiple smartphone companies were rolling out flagship phones with 5G-enabled capabilities, more affordable smartphones with 5G capabilities could be expected soon as well.
If 5G-deficient phones are released in nations where 5G tech has already been unveiled, or is about to be unveiled soon, that will only make 4G phones look less attractive to customers, she said.
Huawei Tech, China’s biggest smartphone vendor, launched its Mate 20 X 5G phone in China on Aug 16. The phone is priced at $870 or 6199 yuan. Handset pre-orders have already exceeded 1M, as per figures released by the firm.
Samsung’s Galaxy S10 and ZTE Corp’s Axon 10 Pro 5G phone have been launched in China as well.
Vivo is scheduled to unveil a 5G smartphone in Shanghai during next week. Xiaomi Corp, a Beijing-based company is expected to unveil a 5G-capable smartphone for Chinese markets as well.
Edison Lee, an equity analyst from Jefferies who covers China Telecom, China Mobile, and China Unicom stated that Chinese telecoms network operators were planning to offer 5G network services to only a tiny portion of subscribers, who are capable of purchasing 5G handsets, either via these providers or from other sources. The telecoms operators aren’t subsidizing smartphones at all at the moment.
Chinese customers are very unlikely to spend over 6000 yuan for 4G smartphones when they are aware that multiple 5G models would be launched in the next year, during its first half, stated Lee.
This situation may be observed in several other markets as well, where commercial 5G services have already been offered. This could spell trouble for Apple’s iPhone series, which is its primary source of revenue.
Commercial 5G services have already been rolled out in several countries like Monaco, Spain, Switzerland, the UK, Australia, the US, and South Korea. However, the Chinese market is so massive, it dwarfs all these economies, combined.
On a global scale, sales of iPhone models fell over 12% to around $25.99B in Q2, after seeing a 17% drop in Q1. Back in Jul, Apple had reported total sales revenue to be around $9.61B from the entire China zone – which includes Taiwan, Hong Kong & mainland China. This revenue, however, was lower by 4% compared to last year’s figures.
At the moment, iPhones are still a popular choice for Chinese customers & other markets as they have a decent resale value when it comes to the used smartphone market, stated Jia Mo, an analyst from Canalys, a research firm.
As all these devices run within Apple’s ecosystem, these new iPhones may still retain a good resale value despite having no 5G support at all. However, people purchasing an iPhone from an operator using monthly plans, with the intention of using them for 2-3 years may be troubled, as having no 5G support could turn out to be a major issue for them.
Canalys currently projects that the global market for 5G-enabled smartphones isn’t likely to surpass 4G handsets in the near future. Canalys has stated that 5G phone sales will overtake 4G devices only from 2023. At this point, over 800M 5G smartphones are expected to be available on the market, accounting for over 51.4% of the world’s smartphone market.Source