Apple iPhone sales in China drop in May after rebound

Pedestrians pass through the signage of an Apple Inc. store at the Shanghai International Center (IFC) in Shanghai, China on Tuesday November 27, 2018.

Qilai Shen | Bloomberg | fake pictures

IPhone sales in China fell in May, showing signs of weakening after Apple saw an initial rebound when the country reopened when the coronavirus outbreak eased.

But other areas of the business grew, including spending on the company’s App Store, which could indicate some resistance for the American tech giant in one of its largest markets.

Data collected from third-party sources by CNBC pointed to a mixed picture of Apple’s performance in China in May.

Apple sold 3.6 million iPhones in China in May, down from 3.9 million in April, according to Shanghai-based CINNO Research. That’s a 7.7% drop compared to April, but it’s higher than the 3.05 million iPhone sold in May 2019.

It contrasts with the 160% monthly increase in April, where Apple benefited from pent-up demand in China and saw a rebound as the country reopened its economy after shutting down for several weeks earlier this year.

IPhone sales in China fell a staggering 60% yoy in February this year. Apple was forced to close stores for several weeks as authorities tried to stop the spread of Covid-19. By mid-March, all stores in China had reopened.

Meanwhile, so-called iPhones sales shipments totaled just over 2 million in May, according to preliminary estimates by another research firm, IDC. That’s about 25% monthly decline, Will Wong, IDC’s research manager, told CNBC.

Sell-in refers to the number of iPhones that Apple sold to its retail partners in China and can be used as an indicator for future demand.

Apple declined to comment on these figures.

Overall, smartphone shipments in China fell nearly 20% month-to-month in May, according to data from the Chinese Academy of Information and Communication Technology (CAICT), a group of experts backed by the Chinese state.

Apple released the second-generation iPhone SE in mid-April, which went on sale in China later that month. It’s the cheapest in the iPhone lineup and helped boost shipments in April when Apple put the device in the hands of retailers. But the company has not released a new device in May, which may partially explain the drop in shipments. But Wong cautions that it could also be a sign of weak demand.

“The main reason (for the drop) is due to low consumer confidence due to labor concerns, due to the economic slowdown, which has decreased consumer confidence,” Wong told CNBC.

However, he noted that Apple was expanding its retail network in smaller-scale Chinese cities, despite headwinds.

Signs of resilience

At Alibaba-owned shopping site Tmall, Apple’s product revenue totaled $ 136.9 million in May, according to WPIC, an e-commerce marketing and technology company that helps foreign brands sell in China. That’s a 7.2% month-over-month increase.

Of course, Tmall is just a channel through which Apple sells its products. Others include Alibaba’s rival, as well as Apple’s own stores and traditional retailers.

But Apple is benefiting from the signs of life in online retail sales in China.

“Apple’s growth in 2020 is staggering considering these numbers include COVID-19 time,” WPIC CEO Jacob Cooke told CNBC. “Ultimately, it is clear that Apple is a resilient company, and we look forward to their continued growth during the second half of 2020.”

Meanwhile, consumer spending on the Apple App Store in China totaled $ 1.71 billion in May, an increase of about 11% from the $ 1.53 billion recorded in April, according to Sensor Tower data.

That money may not go directly to Apple’s top line, but it shows that a growing number of users continue to spend money through Apple’s platform.

The app store is a key revenue driver for Apple’s increasingly important services business, which raised more than $ 46 billion in sales in the last fiscal year.

Boost 5G?

Part of the drop in iPhone shipments and sales in China could be due to consumers expecting a 5G device. Apple is slated to launch one this year, though some analysts are concerned there may be a delay.

Since China started rolling out its 5G networks last year, the popularity of devices capable of connecting to that generation of mobile infrastructure has been on the rise. In fact, 46.3% of total mobile phone shipments in China in May were 5G devices, according to CAICT.

Daniel Ives, an analyst at Wedbush Securities, said in a recent note that he estimates that around 350 million of the 950 million Apple iPhones in use worldwide are ready for an upgrade to the new iPhone, adding that the American tech giant you might see a “5G supercycle”. ”

However, IDC’s Wong suggests that a potentially high price for Apple’s iPhone 5G could slow its success.

“Some consumers may be waiting for 5G iPhones, but two possible restrictions could be pricing and another is the lack of use cases,” Wong told CNBC.