BDA-蘋果中國深度研究Update-20150310

Tiger–AppleinChina Date:

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2015-03-10

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BDAUpdateonAppleinChina

China’ssmartphonemarkethasbeenslowingdownandwillgrowataCAGRof7%inthenextfiveyears;Appletargetshigh-endsegment,whichaccountsfor~15%oftotalshipments

TheshipmentofsmartphoneinChinahasenjoyedrapidgrowthtill2013(CAGR10-13:68%),mainlydrivenbythewaveofreplacingfeaturephones,andmulti-deviceusageonalighterextent.However,thegrowthhassloweddownin2014duetolimitedpotentialfromreplacingfeaturephone

ReplacementofFeaturePhone:Sincemajortelecomoperatorswerelicensedtooperate3Gmobileinternetin2009,manufacturersgraduallyintroducedalargeamountofsmartphonedevicesintothemarket.However,morethan90%featurephoneshavealreadybeenreplacedtill2014,whilemulti-devicesusageonlycontributeslimitedgrowth

Multi-DevicesUsage:Besidesreplacingfeaturephone,increasinglysmartphoneusersinChinaadoptedtwoorevenmoresmartphonesintheirdailylife

Usersadoptedmulti-devicesmainlyduetothefactthatdifferentnetworksoftelecomoperatorshavetheirownadvantages.Forinstance,ChinaMobilehasthebestvoicecallquality,whileChinaUnicomhasthebest3Gdatanetwork.

Usersmayalsousedifferentsmartphonestoseparatetheirworkandlife,theywouldliketocontactcolleaguesorcustomerswithonenumberwhilecontactingfamilyandfriendswithanotherone

Note:Theshipmentincludessmuggledproducts.

WepreliminarilydeemthattheChina’ssmartphonemarketwillslowdowninfuture(CAGR14-19:7%)mainlyduetothelackofgrowthstimulus

Thefrequencyofchangingsmartphonewillbecomethemajordriver,whilethefrequencywillnotsignificantlyimproveinthenextfewyearsbasedonourfocusgroupdiscussion.Oursurveywillsuggestadistributionofreplacefrequency,whichwillhelpusimproveourmarketforecast

Inaddition,we’vebeenalsodoingmoreresearchtoimproveourconclusiononthemarketforecast

MarketBreakdownbyPriceBand:Ingeneral,thesharesofallpricebandslargelyremainunchangedinthepastthreeyears.Appleaddressed~15%oftotalsmartphoneshipmentsinChina,i.e.high-end(USD>580,RMB>3,500)andsub-high-end(USD410-580,RMB2,500-3,500)segments.Apple’smainbattlefieldisthehigh-endsegment,whichgrowsmoreswiftlythanotherpricebands.Applewillbebenefitfromthistrend

OfficialChannelsvs.SmuggledShipments:SmuggledshipmentshavebeenfadingoutduetonarrowedpricegapaswellasstrictercontrolofCustoms

CompetitionLandscape:AppleandXiaomigrabbedsharesfasterthanothersin2014,whileSamsung’ssharedroppedapparently

Apple:ApplehasenjoyedarecordhighgrowthlastyearinChina.Ithasdominatedthehigh-endmarketbylaunchinglargescreendevices,sinceitsmajorcompetitorSamsunghasnosignificantinnovationin2014

TheshipmentofsmartphonesoverRMB3,500hasbeengrowingconstantlyandhastakenabout11%oftotalsmartphonesshipmentin2014Q4whichwasonly4%in2012Q1.High-enddeviceswerealmosttheonlysegmentthatexperiencedsucharobustgrowthduringlastthreeyears,andthisprovidedAppleanopportunitytoexpanditsshareinsmartphonemarket

Furthermore,withinthehigh-endsegment,Applekepttakingcompetitor’ssharebylaunchingnewmodels.Thechartbelowshowsthemarketsharewithinhigh-endsegment,priortoSep2014,AppleandSamsungwerequiteclosetoeachother.However,withthelaunchoflargescreeniPhone,i.e.iPhone6andiPhone6Plus,Applestartedtodominatehigh-endmarket

Xiaomi:Asanewlyintroducedbrandin2011,Xiaomihasexperienceddramaticgrowthinpastyearsanditbecamethesecondlargestsmartphonesupplierin2014thankstoitslowpriceanduniquemarketingstrategy.GivenXiaomi’sdifferentpricefocusfromApple’s,wethinkXiaomiisunlikelytoposesignificantthreattoAppleinthenearfuture

Xiaomimainlytargetsmedium-tolow-endmarkets,anditsshareinpriceranges(RMB600-1,000,andRMB1,000-2,500)increasedapparentlyin2014

Samsung:Samsung’sgloryin2013wasattributedtoitsinitiativeoflargescreens,butitsoverallmarketsharehasbeensqueezedfrom19%to16%in2014,asSamsung’sfullproductlinedidn’tshowanysignificantimprovementandhasbeenfacingchallengesfromiPhoneinhigh-endmarketandfromdomesticplayersinmedium-tolow-endmarket.

InpricerangesofRMB600-1,000andRMB1,000-2,500,SamsungisfacingthepressurefromXiaomishownintheabovetwocharts,whileinthesegmentofRMB2,500-3,500,Samsung’ssharewaserodedbydomesticbrands

Huawei:Huawei’smarketsharekeptgrowing,andby2014,ittookabout9%ofthemarket.ThisachievementwasmainlydrivenbythesuccessofMate7andHonorSerieswhicharepricedaroundRMB3,000.Huaweimainlytargetsmedium-endmarket,butitsMate7hassomepresenceinhigh-endmarket.

Lenovo:SimilartoHuawei,Lenovoexperienceddramaticgrowthfrom2011to2013benefitingfromtheboomingofsmartphonemarket,butonly1pptgrowthin2014.ThemarketsegmentofbelowRMB600seemstobetheonlyhighlightin2014toLenovo.InthepricerangeofRMB600to2,500,LenovowaslosingitssharetoitslocalpeersincludingXiaomi,OPPOandVivo.

KeySuccessfulFactors:Ourpreliminaryfindingsshowproductisanoverwhelminglyimportantfactorinfluencingconsumers’decisionswhenpurchasingsmartphones;brandandpricearealsoessentialforconsumers.Applehasclearadvantagesinproductandbrandoverothers,whileXiaomidoesbetterinvalueformoney.ThankstoApple’scompetitiveedgesintermsofKSF,users’stickinesstoAppleisthehighest

Product:

Basedonourfocusgroupfindings,iPhoneisperceivedtoperformthebestintermsofproduct,forexample,fastandsafeoperatingsystemandeasytouse

XiaomihasgooduserexperienceingeneralbutsomeuserscomplainthatXiaomiisunsatisfyingintermsofheatdissipation

ConsumerswidelyregardSamsung’sproductqualityispoorsinceitsscreeniseasytobreakandthebackboardofSamsung’sphonesareusuallymadeofplastic,resultingininferioruserexperience

Brand:

Apple,XiaomiandSamsungaretheleadingbrands,enjoyinghighbrandawareness,buttheirbrandimagesarevarious.

Apple’sbrandimageisprettypositiveinconsumers’perception,representinginnovationandfashion

Xiaomiwelldeliversabrandimageofvalue-for-moneyanduniquemarketingstrategy

Samsung’sbrandperceptionislargescreen,butpoorquality

Price:

SomeconsumersfromlowertiercitiesbelieveiPhoneisexpensive.HighpricemakessomeconsumersstepbackfromiPhone

Xiaomiissoldatalowerpricethancomparabledevices.Itsproductshavehighervalue-for-moneyinconsumers’perception.Itspriceisattractivetothemassmarket.

AsSamsung’scompetitorsarecatchingup,nosignificantimprovementisdiscernedinSamsung’sproducts,soitsadvantageinvalue-for-moneyisgettingweaker.

Inconclusion,users’loyaltytoiPhoneisthehighest,sincealmostallcurrentiPhoneusersinFGDsaidtheywoulddefinitelycontinuechoosingiPhoneinnextpurchase,especiallyintier1and2cities.Incontrast,theloyaltyofotherbrandsislowandsomeoftheirusersmayturntoiPhoneinfuture.(Wewillobtaintheresultofusersurveylaterandanalyzeitinourfinalreport)

Consumerscarelessaboutthepurchasingconvenienceofsmartphonescomparedtoproductquality,sotheirdecisionsarelessinfluencedbychannels.Incontrast,channelsrelyonbestsellingproductstoboostthesales,soleadingmanufacturershavethebargainingpoweroverchannels

Therearethreetypesofdistributionchannels:self-ownedchannel(retailstoresorofficialwebsites),telecomoperators,anddistributors.Allplayersusesimilarchannelstructuresandemploy4-5samelargescaleddistributorsaswellasthreebigtelecomoperatorstoselltheirproducts

Telecomoperatorsplayedanimportantroleindistributingsmartphonesinthepastseveralyears,sincetheirsubsidypolicyencouragedconsumerstoreplaceoldcellphones.Alongwithtelecomoperator’sdecreasingsubsidy,intensifyingcompetitionandhighersalestarget,telecomoperatorsgreatlypreferdistributingapopularproductwithhighbrandawareness

Eco-systemexertslittleinfluenceonconsumers’purchasingdecision

Applicationstoreshasnegligibledifferenceamongdifferentsystemsorbrands

Currentlymostmainstreamapplicationstoresprovideatremendousnumberofapplications,coveringallthefrequently-usedapplications

Smartphoneusers’requestscanbemetbyeverymajorapplicationstore,sinceonlyafewpopularapplicationsarefrequentlyused

Theaverageamountofapplicationsinstalledperuserisaround30and6-8ofthemarefrequentlyusedeveryday

Theinfluenceofsmarthomedeviceswillbelimitedonsmartphonemarket;Xiaomi’splaninthesmarthomewillnotposesignificantthreattoApple

AlthoughXiaomiseemsmoreaggressiveinlaunchingsmarthomedevices,Applehasalsobeenworkingonthismarket.Xiaomihasn’tbuiltapparentadvantagesinthisarea

Xiaomilaunchedmanydevices,forexample,MiBand,MiHeadphoneandiHealthsmartBloodPressureMonitor,inhighprofileandhasalreadyinvestedin27companiestobuilditsecosystemofsmarthomedevices,includingoneofthelargestlocalhomeappliancemakerMideaGroup

AppleisalsoquicklydevelopingitsHomeKitandhascooperatedwithChina’sanothermajorhomeappliancemanufacturer,Haier

Mostapplicantand3Cproductmanufacturersaswellasinternetcompaniesareinvestingintheindustryofsmarthome.Xiaomiindeedhasplansinpartneringwithothers,butithasaleadingpresence

ThesmarthomedevicesXiaomireleasedareprettypreliminaryandinanearlystage,andindustryexpertsbelievethatXiaomicouldn’thaveground-breakingmovementsinnext3-5years

Infocusgroupdiscussions,consumersdon’tthinksmarthomedeviceswouldaffecttheirphonebuyingbehavior,andwewillconfirmthisthoroughoursurvey

Go-to-marketStrategy

Appledoesn’tpre-installanyapplicationsiniPhoneinChina,includingBaiduandYoukuTudou.AlthoughitiscooperatingwithBaidu,YoukuTudouandWeChatinChina,itisverypreliminary,samewithitscooperationwithGoogle,YouTubeandFacebookinglobalmarket

AppleaddedBaiduasiOSsearchengineinitsSafari,YoukuTudoutoiOSvideosharingoptionandWeChattoiOSsocialnetworksharingoptiontoimproveChineseusers’experience.ButitisalsoduetothefactthatGoogle,YouTubeandFacebookarenotallowedtouseinChina

ThemainchangeofApple’sgo-to-marketstrategyinChinareflectsonitsbiggeradvertisinginvestment,thefastgrowingnumberofAppleStoresanditscloserrelationshipwithChina’slocaltelecomoperators

ApplehasbeenlaunchingstrongeradvertisingcampaigninChina

ThereoncewasnoadvertisementatallforAppleinChina,butnowpeoplecanseeitonTV,inthemetroandontheInternet

ThemarketingdepartmentofAppleChinahasmoredecision-makingpowernow.Inthepast,theadvertisementcouldonlybemadeintheheadquarteroffice,butnowtheChineseteamcanmakeadvertisementthemselves,targetingtheChinesemarket

China’sAppleStoreisrapidlyexpandingtoenablemoreconsumerstoexperienceApple’sproductsandculture

Itgrowsfrom10AppleStoresinearly2014to13byDec2014.And5moreAppleStoreswereopenedinthefirstthreemonthsof2015

Appleplanstoreachthetotalnumberof40AppleStoresinChinainthenexttwoyears

AppleiscooperatingmorecloselywithlocalChinesetelecommunicationcompanies.

ApplestartedtocooperatewithChinaUnicomin2010,thenwithChinaTelecomin2012andwithChinaMobilein2013

ThankstoApple’sapparentcompetitiveadvantagesinhigh-endsmartphonemarket,Appleislik