Worst could be over for iPhone sales in China

Slowing iPhone sales in China was a major concern for Apple. However, things may be back on the upswing, claims UBS analyst Timothy Arcuri.

According to Arcuri’s latest note to investors, Apple is clearing inventory in the country. This is partially thanks to price reductions. While it would be foolish to suggest that there won’t be more struggles, it seems that the worst could be behind Apple.

“While March mix is still bad, the tone in the supply chain is starting to improve and price reductions in China may be starting to clear channel inventory,” Arcuri wrote. “Procurement estimates for XR are actually now up Q/Q in June. [This is] atypical for this late in a ‘new’ model cycle (good near-term for QRVO), but reflective of inventory burn.”

It’s not 100 percent good news, though. Arcuri thinks one of the ways Apple has offset the drop in newer iPhone sales is by increased sales of older models. Since the newer iPhones carry a much higher price tag than predecessors, this means that Apple could still see a drop in China revenue. As a result, UBS drops its March quarter sales estimates from $57.5 billion to $56.5 billion.

Arcuri’s theory that the worst may be behind Apple is seemingly backed up by Apple’s share price. AAPL is currently trading at 26 percent below where it was in October. However, it is also up 20 percent this year. That suggests that confidence in Apple is returning — and not just from analysts.

Price cuts in China

Apple slashed the prices of numerous iPhones in China earlier this year. These included discounts on the iPhone 8, iPhone 8 Plus, iPhone XR, iPhone XS, and iPhone XS Max. Most iPhones received price cuts of around $59. The biggest reduction was around $66 off the price off the iPhone XR.

In an interview with NPR, Tim Cook struck what sounded like a note of caution when discussing the price drop. “We’ll see how that works out for us,” he said.

From the sound of things, the answer may be: Very well.

Source: Business Insider