Apple: Our Point vs Counterpoint Research, and When We'll Add Shares
Counterpoint puts Q1 2024 iPhone sales in China down 19% on a year-over-year basis.
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* Findings from Counterpoint Research’s point to China smartphone share loss for Apple.
* Despite those losses, Apple remained a top three vendor in China in Q1 2024.
* Counterpoint joins us in thinking Apple is poised to take back share as the AI-on-device upgrade cycle unfolds.
* Our plan remains to add more AAPL shares ahead of that upgrade cycle -here's what we’re watching.
Apple AAPL shares were trading off this morning following a report from Counterpoint Research that puts Q1 2024 iPhone sales in China down 19% on a year-over-year basis. The report also found the overall market grew 1.5% compared to year-ago levels, with Apple’s market share falling to 15.7% in the quarter, down from 19.7% in the March 2023 one.
The issue we have with Counterpoint’s data is it didn’t furnish hard figures for the market or the top vendors, of which Apple was third. The firm just shared percentages. While Huawei saw a strong jump in smartphone sales during the quarter, its overall market share at 15.5% still trailed Apple’s.
Our take is these findings confirm what other headlines have suggested, which explains the modest reaction in AAPL shares. Our position has been we would like to bulk up our exposure to AAPL shares ahead of that upgrade wave. When Apple reports on May 2, the fallout from its guidance for the current quarter could give us that opportunity.
Doing some back-of-the-envelope math, estimates put China’s smartphone sales around 23%-24% of the global market. Comparing Counterpoint’s 1Q 2024 findings for the China smartphone market against IDC’s recent report for 1Q 2024 smartphone shipments on a global business, suggests the bulk of Apple’s smartphone declines in the quarter stemmed from China.
Meanwhile, the 26% year-over-year increase in Taiwan Semi’s TSM March quarter smartphone business suggests the rebound in China’s smartphone market should continue, helping drive incremental iPhone volumes compared to the March quarter.
Counterpoint also shared expectations for a pickup in iPhone sales as new AI features are announced, which should also drive a rebound in market share against recent market share takers. This is similar to our larger thinking about the looming AI-on-device upgrade cycle that should drive renewed smartphone volumes.
For Apple, this means that once we digest its upcoming earnings report all eyes will be on the June WWDC event. Because the initial wave of AI-on-device is likely to be on premium devices, that bodes well for Apple’s position as well as that for Universal Display OLED.
Depending on the quarter, 80%-85% of the smartphone market is non-iPhone, which places a heavy reliance on the Android operating system. That also means upcoming earnings and guidance from companies including our own Qualcomm QCOM, as well as Skyworks SWKS and Qorvo QRVO, should help give us a clearer picture of that outlook. Given product lead times, so too should their comments about AI-on-device smartphone models.
At the time of publication, TheStreet Pro Portfolio was long OLED, AAPL, QCOM.
