Q1 smart phone market in China

http://finance.yahoo.com/video/apple-wins-china-q1-150500830…

Interesting video clip.

Some key points:

*Apple had highest market share in China for Q1 for smart phones

*Smart phone market in China is 90% saturated so it’s mainly relying on the upgrade cycle.

Other thoughts:

  1. China’s prosperity is growing.

  2. China’s rapidly growing middle class care deeply about status and being viewed as prosperous. I think that the one child policy which has led to an oversupply of males versus females causes the need for appearing prosperous to be amplified because there is a shortage of women and the men need to impress the women with an appearance of wealth in order to increase their chance of getting a wife. Also, Chinese females care even more about the economic prospects of their mate than Western women. I would conclude from this that the upgrading to the latest version of smart phone will be important to many Chinese (even more so than in the US). Apple has the premium brand and the Chinese will probably eat up each new version in droves. This is good for SWKS as SWKS is a supplier into the iPhone. Perhaps APPL will sell more phones in 2015 than people think.

Chris

My guess is that the 90% saturation is a suspicious number. There are only 2 carriers in China: China Mobile and China Unicom. My understanding is that they share a lot of network equipment, but that could be wrong.

In any case, China Mobile is the gorilla. They only started rolling out 4G-LTE about 2 years ago, starting with the biggest cities. But remember, a city of around 1 million is not a big city in China.

At the time, they were only selling iPhones into markets served by 4G, that may have changed, but why would you buy an iPhone if you didn’t get the benefit of 4G. Yeah, it will still work in a 3G WCDMA network, but you pay for a lot you can’t use without 4G - but then again, it’s China, status means a lot. I don’t know if availability is still constrained.

I tried to find information on the progress of 4G roll-out in China and was not able to find any solid statistics. But I find it inconceivable that they cover the entire market at this time. Given that, I find the 90% saturation unlikely, or at least misleading if 3G is included.

My guess is that the 90% saturation is a suspicious number.

Looks to me like they meant smartphone penetration including all the Gs: 2G, 3G, 4G. If most people upgrade when new phones come out, the saturation is not very limiting to future market growth.