Junheng Li with boutique research shop J.L. Warren Capital this morning opines that Apple‘s (AAPL) rollout of its iPhone 6s is failing to meet expectations, citing as the main reason a failure of the Chinese market to deliver.
“According to information and/or data readily available from AAPL suppliers, we consider that the iPhone 6s initial launch in the 12 markets globally, is not meeting market expectations,” writes Li.
Oddly enough, although Apple announced on September 28th that its first-weekend sales of the 6s beat last year’s 10 million for the iPhone 6, selling more than 13 million units, Li argues the result was underwhelming.
“During the first week (including weekend) or 3 days post launch, we estimate ~13million units were sold. This number is lower than original expectations, largely due to an overestimated demand from mainland China.”
Li cites some China market data from something called Gray Market Marker, which apparently collects the price of iPhones trading on the black market:
AAPL launched the iPhone 6s simultaneously in Hong Kong and mainland China which cannibalized sales in HK. According to the largest grey market make [sic] a consumer electronics trading platform, the current spot prices for many models even on the launch data (9/30/2015) were below the official retail prices, unprecedented in the iPhone launch history. In total, we estimate that ~2.5-3 million of units of the 6s were sold in the mainland and ~1.5 units sold in HK. In comparison with previous years iPhone launches, when the mainland was not included in the initial launch, only 30% of the 6s purchases were from mainland, vs. 50% in previous years.
(One point not addressed by Li is whether the premium can be expected to be lower, or even absent, precisely because the iPhone 6 was only available on the black market last year, having been left out of rhr first round of retail sales.)
Li offers one explanation for why she thinks sales to China are below plan: “Since ZTE and Huawei already launched smart phones with 3D force touch, the new screen is not novel to Chinese consumers.”
Li also offers some other tidbits, such as that the iPhone that comes in rose gold finish was the best seller, making 45% of sales.
As for the outlook, she opines,
We believe that China is the biggest moving piece for AAPL’s global sales in 2015, given it is about 20+% of the company’s global market and the demand for the iPhone is growing at ~20% according to our research. We currently project 200 million units of sell-in for iPhone 6/6+ and iPhone 6s/6s+ combined in 2015, which is 10million sell-through units lower than, the current street consensus.
Apple shares today are down 81 cents, or 0.7%, at $110.50.