Apple’s Recovery Impressive

The author is an analyst of NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com. -- Ed.

 

In March, smartphone shipments in China improved significantly more than expected. In particular, Apple’s recovery was impressive. We expect the Chinese market’s recovery to continue outpacing the improvements seen in other regions, thanks to price discounts, new product launches, and economic stimulus policies. We view this factor as being positive for related domestic parts makers.

Smartphone shipments in China recovering faster than expected

In March, smartphone shipments in China reached 21.03mn units (-21.8% y-y, +231.6% m-m), recovering rapidly from the negative effects of Covid-19 seen in February. Shipments of 5G smartphones climbed significantly to 6.22mn units (+46.7% m-m). A sizeable jump in the number of business days (+46.7% m-m) and the impact of reopening smartphone retail stores, including Apple Store locations, are believed to be the main drivers behind the smartphone shipment recovery.

In particular, we note that shipments of Apple smartphones increased to about 2.54mn units (+19.7% y-y, +414.5% m-m), putting an end to the sharp decline which had continued through February. Apple smartphone shipments in the Chinese market are expected to continue rising in April, as: 1) Chinese online shopping malls have recently been selling iPhone 11 series models at a discount of 9.1~17.6%; and 2) the iPhone SE, a new low-end model, is scheduled for release after Apr 20.

Shipments from Chinese companies are also expected to increase from 2Q20 on the launch of new 5G smartphone models.

Smartphone demand in Chinese market to continue recovering faster than in other regions

While major markets such as the US, Europe, and South America are predicted to see a slowdown in both smartphone shipments and sales in earnest from 2Q20 due to the impact of Covid-19, China is enjoying a relatively quick recovery. If Chinese economic stimulus policies are expanded in the future, the Chinese smartphone market should recover even faster than anticipated. Among Korean companies, we recommend LG Innotek, SEMCO, SKC Kolon PI, Segyung Hi-tech, and Derkwoo Electronics as players likely to benefit from China’s smartphone shipment recovery.

 

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