How Does iPhone SE Fare in China?

When Apple Inc. (NASDAQ: AAPL) rolled out its iPhone SE in the month of March, the Cupertino, California-based tech giant aimed its most affordable iPhone ever at markets that are price-sensitive, particularly China. However, the iPhone maker is reportedly losing market share in the Asian nation, according to Counterpoint Research.

The market research company stated that out of all the smartphones sold in China during the month of May, 10.8 percent of them were iPhone units. The mentioned figure is down from the 12 percent share of smartphone shipments that Apple managed to obtain during the same period in 2015. Moreover, this lowers Apple’s flagship iPhone 5th place among the top brands of smartphones in China. Emphasizing on the importance of price in the Asian market, all of the manufacturers in the country that are ranking higher than the iPhone maker are local firms selling primarily affordable devices.

This news is interesting after the introduction of the iPhone SE in March, which is sold starting at $399. This amount is $250 less than the price of the other iPhones of Apple. However, market players should take into consideration that the lower market share of the tech giant this 2016 in comparison to the previous year does not necessarily mean that the iPhone SE failed at bringing higher demand for iPhones in the Asian country.

Regardless of the lower market share in China during the month of May, there is a good reason to think that the most affordable iPhone ever could be a hit in the Asian country. During most of the third quarter, the deliveries of iPhone SE were supply constrained. Buyers of the device had to wait for several weeks before their units were finally shipped.

The supply constrained sales throughout the Q3 emphasizes 2 important things: 1) the demand for the device perhaps surpassed the expectations of the management for the quarter, and 2) this paints the data from Counterpoint Research in a different light as the market share decline reflected a small Y-o-Y drop, considering that the supply of the iPhone SE was supply constrained during the mentioned quarter.

Whether or not the latest iPhone will turn out a success in the Asian country, the iPhone maker will likely require more strategies to reinvigorate the market. The overall revenue of Apple Inc. in the Greater China region, including mainland China, Hong Kong, and Taiwan, is experiencing difficulties in recent times. The company revenues in the mentioned region dropped 26 percent during Apple’s most recent quarter, in comparison with the same quarter in the previous year.

All in all, while declining iPhone market share in the Asian country, together with the recent year-over-year drop in revenue in the Greater China region during the second quarter may make the China market situation look worse than it is for the iPhone maker, it can be considered as something still worth keeping an eye on. Furthermore, if sales in the second largest market of Apple Inc. continue to show weakness over the long term, even the tech giant’s price-to-earnings ratio of 11 may start to look expensive.

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