Smartphone Weekly Notes: iPhone Conquers China, BlackBerry Makes Up With T-Mobile

May 11th, 2015 · by Trefis Team
AAPLYTD+28.3%SPYYTD+12.0%QQQYTD+14.9%
Analyze AAPL →

The smartphone industry had an interesting week, with BlackBerry (NASDAQ:BBRY) renewing ties with T-Mobile after a year-long spat by agreeing to offer the Classic handset to customers on the T-Mobile network. In other news, IDC reported that the Chinese smartphone market shrank for the first time in six years, while indicating that Apple (NASDAQ:AAPL) emerged as the top smartphone vendor in China. Here’s a quick look at the news that mattered in the smartphone space.

China’s Smartphone Market Contracts For the First Time In 6 Years

The massive growth in China’s smartphone market may be coming to an end. According to IDC’s latest Mobile Phone Tracker report, the Chinese smartphone market contracted by about 4% year-over-year during Q1 2015, with 98.8 million smartphones shipped. This marks the first year-over-year contraction in six years. The market also shrank by about 8% on a sequential basis, owing to a significant buildup of inventory towards the end of last year. Smartphone penetration in China stands at over 90% according to market-research firm Counterpoint, and future sales are likely to be primarily driven by replacement demand. [1] However, there could still be a lot of room for growth in the high end of the market since a bulk of China’s roughly 900 million mobile phone subscribers are still using low-end and mid-range smartphones.

[trefis_slideshow ticker=”aapl” rhs=”3″]

Apple Emerges As China’s Largest Smartphone Vendor

Apple emerged as the top smartphone vendor in China during Q1 2015, holding about 14.7% market share, according to IDC. Consumer appetite for the company’s large screen iPhone 6 and iPhone 6 Plus models remained strong, enabling the company to ship about 14.5 million units, translating into a 62% year-over-year increase. [2] This is quite a feat, since the iPhone retails for more than twice as much as the average smartphone sold in China (the iPhone 6 sells for roughly $850). The second largest vendor, Xiaomi, which shipped about 13.5 million smartphones, sees a bulk of its sales coming from price points of below $400. While the broader Chinese smartphone market is saturating, demand for premium smartphones could remain strong as customers upgrade to more capable and premium devices. Apple is likely to be the biggest beneficiary of this trend, given its strong brand cachet and the aspirational value that the company’s products enjoy among China’s growing middle class.  That said, there’s no guarantee that Apple will hold on to the top spot in the next quarter, since consumer brand preferences in China tend to be quite volatile. For instance, vendors including Samsung, Lenovo and Xiaomi have each held the top spot of the Chinese market at least once during the past year.

  • We have a $134 price estimate for Apple, which translates to a market cap of about $770 billion. Our price estimate is slightly ahead of the current market price. We are modeling iPhone shipments of about 210 million units for CY 2015. We estimate the company’s CY 2015 revenues to come in at around $226 billion. Our FY 2015 EPS estimate of $8.88 compares to a consensus of about $8.96 according to Reuters.

[trefis_slideshow ticker=”bbry” rhs=”3″]

BlackBerry Buries the Hatchet with T-Mobile

BlackBerry said that it would begin selling its Classic smartphone on T-Mobile’s network later this week under a new partnership. The move comes just about a year after the two companies severed ties following a relatively public falling-out after T-Mobile emailed promotions to BlackBerry customers encouraging them to switch to Apple’s iPhone. The carrier will offer the Classic starting for $440 outright, or about $18 per month over two years. The deal works well for both companies. While BlackBerry has been looking to revive its smartphone business by designing handsets targeted at its core base of enterprise and government users, T-Mobile has been trying to gain a greater foothold in the enterprise market. In March, T-Mobile unveiled a flat-fee pricing model for business customers that it says is cheaper and less complicated than offerings from larger rivals such as Verizon and AT&T. [3]

  • Trefis has a $9.50 price estimate for BlackBerry, which translates to a market cap of around $5 billion.  Our price estimate represents a small downside to the current market price. We estimate the company’s FY 2015 loss per share at around $0.04, which compares to a consensus loss of $0.07 according to Reuters. We are forecasting the company’s CY 2015 revenues at $3.15 billion.

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research

Notes:
  1. China’s Smartphone Market Slows Down, WSJ, May 2015 [↩]
  2. China’s Smartphone Market Contracts YoY For the First Time in Six Years, IDC, May 2015 [↩]
  3. T-Mobile Reboots With BlackBerry, WSJ, May 2015 [↩]
Invest with Trefis →More Ideas →