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China's Smartphone Shipments Down Sharply in February; Apple's Results Seen as 'Solid'

Published 03/21/2022, 08:47 AM
Updated 03/21/2022, 09:18 AM
© Reuters China's Smartphone Shipments Down Sharply in February; Apple's (AAPL) Results Seen as 'Solid'
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Smartphone shipments in China declined 31.8% to 14.5 million units in February, compared to the same period last year.

A new report by the China Academy of Information and Communications Technology (CAICT) showed that shipments plunged from 21.3 million handsets reported in February 2021 and 32.4 million in January 2022.

Smartphone makers continue to grapple with global chip crunch issues which significantly affect their production output.

Several challenges such as miscalculated demand, plant shutdowns, and disputes between the United States and China have resulted in numerous automakers reporting chip sourcing problems.

Since then, the chip shortage has expanded to other sectors as well, including smartphones.

China-branded mobile shipments were down 35% y/y, but non-China branded mobile phones - a proxy for Apple's (NASDAQ:AAPL) iPhone - were only 5% down y/y. For the first two months this year, total shipments were up 10% y/y.

UBS analyst David Vogt said that the iPhone outperformed local rivals in China in February with the market share increasing 320bps to 11.4% YoY.

On a LTM basis, we est iPhone shipments in China totaled 48M capturing ~14.6% share. While Apple's share gains are impressive, lockdowns in mid-March in China will likely be the focus of investors going forward. While initial checks indicate the lock down is manageable and should not be a material headwind for the March qtr, a wider and more prolonged lock down could be a modest headwind in the June qtr. That said, we are not changing our iPhone March (55M), June (45M), and FY22 (235M) forecast at this time given the mitigation efforts by Apple and its partners but are monitoring policy changes, Vogt said in a client note.

As a result, the analyst has left his March/June iPhone unit estimates unchanged amid solid China data. However, these market gains are offset by Russia and recent COVID lockdowns in Shenzhen.

Vogt estimates that Apple will sell 55 million iPhone units in the March quarter, lower than the 57 million consensus.

Goldman Sachs analyst Allen Chang said he remains selective on smartphone components under the modest market growth, preferring market share gainers or those with product mix upgrades/product line expansion.

By Senad Karaahmetovic

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