Apple may see advantage over its competitors in China

The discount by Apple Inc on the iPhone 11 in China and the release of a new low-price SE model have put the company in a better position than rivals to weather a coronavirus-related plunge in global smartphone demand.

While China, which accounts for roughly 15% of Apple’s revenue, appears to be a rare bright spot, investors will be keen to get a picture of global demand when the Cupertino, California-headquartered company reports second-quarter results.

Due to COVID-19 outbreak, the iPhone maker has shut retail stores in the United States and Europe, and China is the only major market where it has been able to reopen all shops.

Consumer spending is expected to be muted as the pandemic has crippled economies and Apple, the world’s second-most valuable tech company, is better armed with the launch of its new price-conscious iPhone model, analysts said.

“Apple is better positioned than most to experience a rapid recovery in a post COVID world,” Evercore analyst Amit Daryanani said in a research note. “We see demand as pushed out, not canceled.”

He added that the launch of the $399 iPhone SE suggested that Apple’s supply chain was getting back on its feet after weeks of shutdown earlier this year.

On the other hand, Chinese brands such as Oppo and Vivo who have steadily moved to offer high-end models to challenge iPhones, stand to lose market share as bargain hunters choose Apple.

The cheaper iPhone SE could tempt iPhone owners to opt for a newer device, something they might have otherwise delayed in a weak economy, said Nicole Peng, who tracks the smartphone sector at research firm Canalys.

“People want to avoid uncertainty in a downturn,” she said. “Having a brand like Apple that can showcase quality and make people less worried about breakdowns or after-sales service can bring in buyers.”

Early data suggests that the Chinese smartphone market is recovering rapidly in the aftermath of the virus, and Apple has emerged relatively unscathed.

Sales of iPhones in China jumped 21% last month from a year earlier and more than threefold from February, government data showed, meaning March-quarter sales in the country were likely to have slipped just 1%.

To be sure, a recovery in Chinese demand won’t offset sales lost in the United States and Europe. And the company is yet to launch a smartphone enabled with 5G wireless technology like those offered by Asian rivals, a disadvantage for Apple so far.