Chinese patriotism will 'halve' Apple's sales in China, analysts warn (AAPL)

China iPhone

  • Analysts at Citi slashed their outlook for Apple, predicting that the ongoing trade war could halve the firm’s sales in China.
  • The bank maintained its “Buy” rating in a note to clients on Monday, but lowered its target price to $205 from $220 and warned that could go lower.
  • The analysts wrote that US-China friction is denting Apple’s brand in China, and causing Chinese citizens to turn to domestic mobile brands.
  • Separately, analysts have warned that President Trump’s trade war could backfire and hurt Apple.
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The US trade war on China will provoke Chinese citizens into turning away from Apple and buying domestic mobile brands instead, according to an analyst note from Citi on Monday.

The analysts predicted that Apple’s brand is already being damaged in China, and that this is a recent deterioration. According to their calculations, China accounts for 18% of all Apple sales, but that figure could halve thanks to the trade war.

“We are proactively slashing our iPhone unit sales as we believe the US/China trade situation will result in a slowdown of Apple iPhone demand in China as China residents shift their purchasing preference to China
national brands,” they wrote.

“Our independent due diligence now shows a less favorable brand image desire for iPhone and this has very recently deteriorated.”

They maintained a “Buy” rating on Apple’s shares, but slashed the target price to $205 from $220 and warned that could go lower.

Confusion about Android on Huawei’s phones could help boost iPhone sales … maybe

Citi’s analysts noted that the confusion about whether Android would continue to work on Huawei’s handsets could help Apple shift more iPhones. Anyone worried about whether Google could suddenly pull the plug on OS support on Chinese handsets could hedge their bits and switch to an iPhone, the thinking goes.

But they argued that it’s likely other Android phone makers (think Samsung) who would more likely benefit from this confusion. Apple would gain 5% of phone unit sales at most, they estimated.

And overall, the drop in Chinese sales could trim iPhone sales by up to 10 million units for 2020.

Other analysts have separately predicted that the Trump administration’s decision to blacklist Huawei could backfire and hurt Apple. They argued that China could ban US technology sales, and the trade war could impact Apple’s Asian supply chain too.

Huawei’s chief executive, Ren Zhengfei, said in an interview that he would be the “first to protest” if his home country retaliated against Apple.

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