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 In a Reuters survey of 10 retailers in Hong Kong, Beijing, Shanghai
and Shenzhen, seven - including four Apple Stores - reported solid
early demand, but three third-party retailers said sales were weak.
Two suppliers of components for Apple phones, including the new
iPhone SE, said they were seeing lower orders.
"I've been dealing with iPhones for five to six years now. This
current quarter for Apple feels weak," said an executive at a
Taiwan-based company whose components are used in iPhones including
the SE model, which markets for $399. "Our current shipment
situation for Apple is not like the last two years. There are more
iPhone models, but the total volume of iPhones is falling."
Such a mixed outlook from Greater China, its most important market
after the United States and generator of a quarter of the company's
revenue, could be a major cause of concern for Apple.
The company's revenue from the region, which includes Hong Kong and
Taiwan, dropped 26 percent in the March quarter, making it the
weakest region in the world.
Apple did not respond to requests for comment on the Reuters survey.
STILL POPULAR
"iPhone is still popular but sales have dropped because... there's
no new model and the SE is similar to 5C. So it doesn't sell well,"
said Zhu You Peng, a salesman at Apple product reseller Xiongyu in
Shenzhen. The 5C was Apple's last attempt to produce a cheaper
phone, back in 2013.
Zhu said it sold around 300 iPhones per month last year but the
number has dropped to around 100-200 this year.
That view contrasts with upbeat comments about the phone from
Apple's Chief Financial Officer Luca Maestri on Tuesday.
"The situation right now around the world is that we are
supply-constrained," he told Reuters, referring to the iPhone SE.
"The demand has been very, very strong."
The iPhone SEs are sold out in Apple's own stores in mainland China
and customers have to wait about three weeks to get the product
delivered by Apple, according to Apple's websites. The size of the
original supplies to the stores is unclear.
Apple, whose shares dropped about 8 percent after it reported the
disappointing first-quarter results on Tuesday, is under pressure to
show that the decline in iPhone sales represents just a hiccup,
rather than a permanent shift for the product that fueled its
meteoric rise.
It isn't the only challenge facing the U.S. technology giant. Its
mobile entertainment services were blocked online in China earlier
this month just at a time when it wants to grow services business as
potential source of revenue against tapering iPhone sales. The New
York Times reported that a state regulator had demanded Apple halt
the services.
The new phone was seen as an important offsetting influence in
subsequent periods until Apple launches its iPhone 7 - widely
expected around September. The lower price point was part of a
strategy to compete against Asian rivals in emerging markets such as
China.
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At the iPhone SE product launch in March, Apple vice president of
iPhone Product Marketing Greg Joswiak singled out China as a target
market, saying four-inch displays like that on the iPhone SE were
still popular with first-time smartphone buyers. Apple's mainstream
iPhone 6 and iPhone 6 Plus have 4.7-inch and 5.5-inch screens.
SUPPLIERS ARE NOT UPBEAT
Another supplier said iPhone orders will be lower in the second
quarter and second half of this year. It also provides a component
for the SE model.
"Our customer is aiming for a higher target, but we are more
conservative on that," the person said, referring to Apple.
That adds to concern that Apple may further lose momentum in China,
where slowing economic growth may prompt more consumers to snap up
cheaper phones.
"Local brands are taking up more sales, especially among low income
people who earn less than 3,000 yuan a month. OPPO, Vivo phones that
cost around 1,000-2,000 yuan sells the best among them," said Zhu at
Xiongyu.
Aided by strong market share gain in China, Chinese smartphone
vendors shipped more smartphones globally than Apple and Samsung
Electronics Co combined had supplied for the first time in the first
quarter, according to research firm TrendForce.
Underscoring the surging growth for Chinese vendors, Huawei
Technologies Co Ltd [HWT.UL], third-largest after Samsung and Apple,
reported earlier this month a 62 percent growth in global smartphone
shipments in the first quarter.
"Consumers who want to show they are rich enough, they will buy an
iPhone... those who want to use something different, they will
choose Samsung," Joonsuh Kim, chief design officer of Huawei's
consumer business group, told Reuters, referring to consumers in
China.
"But these days consumers are not that old fashioned. They are
getting much smarter, and this is why we have much chance," said the
former Samsung mobile design director.
(Additional reporting by J.R. Wu in TAIPEI, Clare Jim and Kevin Dai
in HONG KONG, Paul Carsten in BEIJING and Aradhana Aravindan in
SINGAPORE; Writing by Miyoung Kim; Editing by Martin Howell)
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