Fred Dufour | AFP | Getty Images
A Chinese woman reacts while setting up the facial recognition feature on her iPhone X inside an Apple showroom in Beijing on November 3, 2017.
Apple’s iPhone X is not only pushing existing customers in China to adopt the new luxury phone, but is even causing people to switch away from different brands, according to Morgan Stanley.
The combination of faster iPhone X adoption by Apple users and the increased switching rate is “accelerating” Apple’s market share in China, one of the globe’s most valuable mobile markets.
“Additional data show that iPhone X adoption in China is on a faster pace than the iPhone 8 and 8 Plus … Despite faster penetration of iPhone X vs. iPhone 8/8 Plus, we believe there remains significant pent-up demand from the base of 2+ year old iPhone owners,” wrote analyst Katy Huberty on Thursday. Huberty explained that nearly half of Apple users in China who have already purchased the iPhone X upgraded from the iPhone 7 and 7 Plus, leaving a long “runway” of customers with phones older than two years.
Apple “remains our top pick entering 2018,” Huberty added.
Source: Morgan Stanley
The net switching rate – the percentage of non-iPhone smartphone owners that switched to an iPhone minus the percentage of iPhone users that switched away to a different phone – jumped 130 basis points in the four-week period ending November 19, according to Morgan Stanley.
Apple’s stock has reflected the company’s impressive product lineup and adoption rates throughout 2017. Shares are up 14 percent in the past three months and 51 percent since January. Though shares were unchanged in premarket trading Thursday, they shed more than 1 percent Tuesday after Nomura Instinet lowered its rating for Apple shares to neutral in a rare downgrade.
Still, the vast majority of Street analysts view Apple share as a good bet for investors looking for equity upside.
Source: Morgan Stanley
“Ultimately, these data points show that faster iPhone X penetration, coupled with increasing switching rates to Apple, have accelerated market share gains for the iPhone in China,” explained Huberty. “In the last six months, Apple’s period-over-period active smartphone market share gains have averaged 1.4 basis points. In the two four-week periods that contain partial iPhone X shipment data, however, share gains averaged 87.1 basis points, driving iPhone market share to 21.2 percent.”