Apple sales in China continued to recover in April, thanks in part to the release of a cheaper iPhone.
It comes as the second largest economy in the world is slowly reopening after coronaviruses forced store closures earlier this year that caused sales to decline.
However, analysts have warned the US technology giant could face a rocky road ahead of one of its most critical markets – China.
Data from multiple sources marked by CNBC has painted a positive picture for Apple since February, the height of the nation̵7;s coronavirus outbreak.
Sales for the iPhone in China dropped a staggering 60% year-on-year in February this year. Apple was forced to close its stores within a week as authorities sought to promote the spread of Covid-19. By mid-March, all stores in China were reopened.
Apple sold 3.9 million iPhones to China in April, according to CINNO Research. That’s a 160% increase since March, when it sold 1.5 million smartphones, a Shanghai-based research company told CNBC.
Apple’s sales sold nearly 3 million in April, according to a preliminary estimate by another firm, IDC. That’s a 30% increase compared to a month ago.
The Sell-in refers to the number of iPhones Apple sells to its retail partners in China and can be used as a gauge for future demand.
In April, overall smartphone shipments to China rose more than 94% compared to March and reached 40.8 million, according to state-run think tank, China Academy of Information and Communications Technology.
Apple sells through a number of official retailers. One of these is the e-commerce site owned by Alibaba, Tmall.
Revenue from sales of all Apple products through its official store in Tmall jumped nearly 40% month-on-month in April to $ 127.6 million, WPIC, an e-commerce tech and marketing firm, said helping foreign brands sell in China, told CNBC. For iPhones alone, revenue from Tmall rose by over 33% month-on-month to over $ 80 million.
Meanwhile, there are also signs of a lifetime of revenue for Apple services. While it is made up of many different products – from Apple Music subscriptions to iCloud, CNBC has only come up with estimates for consumer spending in China on the App Store. That figure was $ 1.53 billion in April, or an increase of 7% month-on-month, according to Sensor Tower, which monitors spending numbers on the app.
Apple did not respond to CNBC’s request for comment.
The various data points in a rosier picture for Apple’s business in China, a crucial market for the company. But analysts have warned the Cupertino giant could face some headwinds over the next few months.
iPhone SE bump?
Apple released the second-generation iPhone SE in mid-April which was subsequently sold in China the following month. It starts at 3,299 yuan ($ 464) on the mainland.
CINNO Research reported that the iPhone SE accounted for 24% of all 3.9 million sales of Apple’s iPhone in April, despite selling only next month.
IDC said the iPhone SE accounted for almost 8% of shipments in April. But one analyst said the figure may not necessarily reflect demand.
“We find that demand is not as strong as this supply,” Will Wong, research manager at IDC, told CNBC.
On top of that, there are concerns that the epidemic could deal with a sharp blow to the Chinese economy throughout the year, which could affect consumer spending.
“It’s still tough. It’s hard not just for Apple but for all smartphone makers. For Apple it’s hard because right now, the economic situation is poor and consumer sentiment is not completely back to normal levels, “Wong said.
He added that consumers can choose mid-to-low-range smartphone models. Apple has only one device in that category – the iPhone SE – while other vendors, such as Chinese phone makers Xiaomi or Huawei, can cater to customers looking for a cheaper handset.
“Users may consider buying Apple but for now they can choose Huawei because they can get a phone with cheaper price and good features,” Wong said.
5G in China
Meanwhile, smartphones with 5G connections have started in China after the country began launching its networks last year. The next-generation mobile networks promise extra data speed.
A number of Chinese vendors including Huawei and Xiaomi have released 5G smartphones, but Apple has yet to release one. This is important because 5G devices are expected to account for 40% of total smartphone sales in China by 2020, according to Counterpoint Research.
If Apple has not launched a 5G phone, consumers may shop elsewhere for one, or hold off buying a new iPhone until Apple releases one.
“Demand for 5G phones although increasing meteorically could bring some headwinds to Apple’s overall volumes in (the) coming months until a 5G iPhone is launched,” Neil Shah, director of research at Counterpoint Research, told CNBC.