Strategy Analytics Brings Good News for Apples iPhone in China

By Markets Fool.com

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Apple's iPhone line has been well received in China. Source: Flickr userKarlis Dambrans

When Apple released its fiscal Q2 results, the highlight for investors on a geographical basis was China. While overall revenue grew 27% year over year, Apple's Middle Kingdom revenue grew a mind-boggling 71% during that period, making Greater China Apple's second-largest region by sales.

Meanwhile, from a product basis, Apple continues to outperform in its core product and business line: the iPhone. In the recently reported quarter, Apple grew iPhone revenue 55% from last year's corresponding quarter as the newest, larger form-factor iterations -- the iPhone 6 and iPhone 6 Plus -- found a receptive audience worldwide.

The intersection of these two data points is Apple's iPhone sales in China. Unfortunately, Apple doesn't release specific numbers in regard to unit sales by geography, although CEO Tim Cook commented that iPhone sales in China were "up 70% year over year." However, for those interested in specific figures, third-party research firm Strategy Analytics recently released its estimates for smartphone sales during Apple's second fiscal quarter.

Good news for Apple in China
When comparing unit shipments within China, Strategy Analytics confirms that Apple's core product is popular within that market. It reports that in the first calendar quarter of 2015 (Apple's second fiscal quarter ran from Dec. 28 to March 28. so the comparison is off by a few days), iPhone unit shipments rose 73% year over year, topping Cook's 70% figure.

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Strategy Analytics found that Apple shipped 13.5 million units last quarter as opposed to 7.8 million the year prior. Perhaps more intriguing, however, was the fact that the company grew unit sales sequentially -- from 13.4 million units in the fourth calendar quarter to 13.5 million.

There are a few caveats behind those numbers. Apple benefited from a full quarter of availability last quarter, as its newest iPhone units went on sale in China in mid-October. In addition, Cook credits Chinese New Year, in part, for strong sales this quarter. All those factors included, however, selling more smartphone units in the second quarter of availability versus the first points to continued demand for the product.

Xiaomi is finding it's hard to compete by copying
Apple's strong iPhone results moved the company closer to the No. 1 market share spot in China. Its biggest competitor, homegrown vendor Xiaomi, has encountered slowing growth recently. Last quarter, the company still edged out Apple from a units-sold standpoint, but the lead is noticeably smaller than it once was -- Xiaomi shipped 14 million units whereas Apple shipped the aforementioned 13.5 million.

For Xiaomi, its year-over-year results are still rather impressive with 32% growth -- from 10.6 million units shipped in Q1 2014 to 14 million last quarter.

However, more recently Xiaomi has struggled. After hitting a high-water mark of 17 million units sold in Q3 2014, the company has registered two consecutive quarters of declines (a fourth-quarter figure of 15.7 million units and the aforementioned 14 million last quarter).

It appears that Xiaomi's struggles began with Apple's huge sales ramp-up for the iPhone 6 and iPhone 6 Plus last fall. Xiaomi has always taken heavy design and marketing cues from Apple and has relied on lower price points and home-country advantage in order to move units in China.

Recently, that strategy appears to be hitting its limits. At some point, it appears Xiaomi will have to differentiate from Apple on more than price in order to keep its growth story intact.

The article Strategy Analytics Brings Good News for Apples iPhone in China originally appeared on Fool.com.

Jamal Carnette owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.