28/04/2020
SHANGHAI (Reuters) – Apple Inc’s (AAPL.O) discounts on the iPhone 11 in China and the release of a new low-price SE model have put the company in a better position than rivals to weather a coronavirus-related plunge in global smartphone demand.
While China, which accounts for roughly 15% of Apple’s revenue, appears to be a rare bright spot, investors will be keen to get a picture of global demand when the Cupertino, California-headquartered company reports second-quarter results on Thursday.
The iPhone maker has shut retail stores in the United States and Europe following the COVID-19 outbreak, and China is the only major market where it has been able to reopen all shops.
Consumer spending is expected to be muted as the pandemic has crippled economies and Apple, the world’s second-most valuable tech company, is better armed with the launch of its new price-conscious iPhone model, analysts said.
“Apple is better positioned than most to experience a rapid recovery in a post COVID world,” Evercore analyst Amit Daryanani said in a research note. “We see demand as pushed out, not canceled.”
He added that the launch of the $399 iPhone SE suggested that Apple’s supply chain was getting back on its feet after weeks of shutdown earlier this year.
Analysts expect Apple to report a 6% drop in revenue and an 11% fall in net income in its fiscal second quarter, according to Refinitiv data.
On the other hand, Chinese brands such as Oppo and Vivo who have steadily moved to offer high-end models to challenge iPhones, stand to lose marketshare as bargain hunters choose Apple.
Earlier this month, several online retailers in China slashed prices of the iPhone 11 by as much as 18% – a tactic Apple has used in the past to boost demand. And while initial social media reaction to the new iPhone SE was muted, analysts said they were seeing a pick up in demand.
The cheaper iPhone SE could tempt iPhone owners to opt for a newer device, something they might have otherwise delayed in a weak economy, said Nicole Peng, who tracks the smartphone sector at research firm Canalys.
“People want to avoid uncertainty in a downturn,” she said. “Having a brand like Apple that can showcase quality and make people less worried about breakdowns or after-sales service can bring in buyers.”
CHEAP IS GOOD
Early data suggests that the Chinese smartphone market is recovering rapidly in the aftermath of the virus, and Apple has emerged relatively unscathed.
Sales of iPhones in China jumped 21% last month from a year earlier and more than three fold from February, government data showed, meaning March-quarter sales in the country were likely to have slipped just 1%.
To be sure, a recovery in Chinese demand won’t offset sales lost in the United States and Europe. And the company is yet to launch a smartphone enabled with 5G wireless technology like those offered by Asian rivals, a disadvantage for Apple so far.
But those same expensive 5G models may not sell well in the current climate of frugality, analysts said.
“If there are no massive subsidies (in China), I doubt there will be many smartphone users who will be eager to upgrade to 5G,” said Linda Sui, who tracks the smartphone sector at research firm Strategy Analytics.
Sui expects iPhone shipments in 2020 to be down 2 percentage points at the most, versus double digit declines at Chinese firms.
Apple also has revenue from its services business to fall back on. It has leveraged its large iPhone customer base to boost services revenue from music, apps, gaming and video.
“Apple’s Services segment should remain resilient in today’s work-from-home environment, thereby demonstrating the durability of Apple’s model,” Cowen analyst Krish Sankar said.
Source: Reuters
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26/04/2019
BEIJING, April 26 (Xinhua) — Chinese authorities are looking to renew regional development plans for the country’s less developed western and northeastern regions to bolster broader growth, according to a report by the China Securities Journal.
New guidelines on advancing western development in the new era are set to be released soon, which will focus more on environmental protection and implementation of the Belt and Road Initiative, said the paper.
Supply-side structural reforms will be deepened, and technology innovation will be encouraged in the west to foster high-quality growth.
After China put forward the West Development Strategy in 1999, the country’s western regions have achieved remarkable progress in the past decades.
Since 2012, the western regions have sustained an average annual GDP growth rate of 8.9 percent, 1.8 percentage points higher than the national growth rate, suggesting an ever-shrinking development gap between the country’s east and west.
The upgraded strategy is likely to unleash another round of fast growth for the west, and industries including construction and machinery will benefit the most as infrastructure construction will remain a focus, the paper cited Xu Liying, an analyst with Lang Steel Information Research Center.
The paper also reported that plans on reviving the country’s northeastern regions had been drafted for further deliberations.
In recent years, the northeast, an old industrial base, has faced more difficulties than the rest of the country as the region relies largely on heavy and chemical industries, energy resources, raw materials and a large number of state-owned enterprises.
The government has already released a set of measures aimed at revitalizing the northeast, but more efforts are needed to optimize industrial structure and improve the business environment to narrow the development gap with the rest of the country, said the paper.
The upcoming regional plans came as the government seeks to tap development potential in less-developed regions to support growth while reducing regional disparities.
Official data showed the Chinese economy expanded 6.4 percent year on year in the first quarter, remaining flat with the GDP expansion in the previous quarter.
Source: Xinhua
Posted in analyst, bolster growth, China alert, China Securities Journal, Lang Steel Information Research Center, regional development plans, Uncategorized, West Development Strategy in 1999, Xu Liying |
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