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Apple Inc. (AAPL) iOS Market Share To Suffer As Chinese Economic Slowdown May Slash Global Smartphone Growth

An IDC report asserts that smartphone shipments will continue their dwindling growth trajectory this year, due to the Chinese economy's slowdown. China is the largest smartphone market, and is the biggest contributor to Apple Inc.'s (NASDAQ:AAPL) flagship iPhones. It has been the main factor for iPhone's astounding sales in the last few quarters.

The report gave the lead to Google Inc.'s (NASDAQ:GOOGL) Android smartphones, at 81% smartphone market share, for the next four years. Moreover, if Apple were to introduce its relatively low-cost iPhone 6C, it will bolster the iOS market share.

It needs to be understood that the Chinese market slowdown will hit high-end brands the most, especially Samsung Group's (OTCMKTS:SSNLF) Galaxy S6 and S6 Edge. In a battle between high-end brands in China, Apple may win due to the prestige associated with its products, and its exclusive ecosystem.

On the other hand, Samsung Galaxy may see a drop in sales. The most to win from China's economic condition would be the local companies, such as Xiaomi, Huawei, ZTE, and One Plus. These companies will further erode the market share of Samsung's low-cost phones, as they are part of the Android family, boast a low-price tag, and sport advanced features and specifications.

The iPhone 6C is rumored to be launched simultaneously with the next-generation iPhone 6s and 6s Plus, and will be categorized in the $200 category. However, IDC believes that it will be hard for iPhone 6C to displace the market share of low-cost Android phones, due to their low profit margins, and numerous features.

The IDC report states that Apple will grow from 192.7 million units recorded in 2014, to 223.7 million units in 2015; this is further projected to grow to 269.6 million units by 2019. On the other hand, Android phone sales will be 1.54 billion units in 2019.

This year, the smartphone market grew 1.2%, which is a huge plummet from the 19.7% growth in 2014. Last year, China was the destination of nearly one-third of all smartphone shipments. It will continue to be the biggest smartphone market due to the sheer demand. However, it is estimated that the shipments will drop from 32.3% global share in 2014, to 23.1% in 2019.

It is no secret that China's middle class will continue to grow, and become more affluent; therefore, the logical step for people with low-cost phones is to upgrade to high-end ones, which will help Apple sustain its position. In press conference, Apple CEO Tim Cook stated that iPhone activations in China have accelerated in the past few weeks, and reassured investors that Apple will continue to increase shipments to the country in future.

However, the IDC report should be juxtaposed with the yuan devaluation. The 4% devaluation will inadvertently make foreign brands more expensive for the Chinese consumers, but will benefit the local vendors.

The devaluation is significant, since rapid export growth played a central role in the Chinese economic growth. Therefore, it needs to properly examine how both factors – economic slowdown and devaluation – will affect the international smartphone brands in the country.

The Android market will not be majorly affected, as the operating system's (OS) use in the local phones provides respite to Google. Nevertheless, it is likely that iOS' share in the Chinese smartphone OS market will dwindle.


Source: Apple Inc. (AAPL) iOS Market Share To Suffer As Chinese Economic Slowdown May Slash Global Smartphone Growth

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