Apple upbeat on iPhone SE demand but some Asian retailers, suppliers less cheery – Reuters

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* China/HK retailers provide mixed views of demand for
iPhone SE

* Parts suppliers say they see soft demand

* Huawei further gains global market share

By Yimou Lee

HONG KONG, April 27 After announcing its
first-ever drop in iPhone sales on Tuesday, Apple Inc
sought to reassure investors by saying its latest and cheapest
model was in strong demand after being launched in late March.
Some retailers and suppliers in Asia aren’t so sure.

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

“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

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


“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

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.

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.


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

Underscoring the surging growth for Chinese vendors, Huawei
Technologies Co Ltd, 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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