China is the world's biggest 5G smartphone market. That's why Apple's 5G iPhones are so important

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GUANGZHOU, China — Apple’s iPhone 12 range with 5G connectivity is going to be very important in China and key to achieving what analysts are calling an upgrade “supercycle.”

5G refers to next-generation mobile networks promising super-fast data speeds.

On Tuesday, Apple unveiled four new 5G-capable iPhone models. While 5G networks are in their infancy, China’s networks have been pushing quickly to expand coverage.

That has led to a surge in 5G smartphone sales, particularly from domestic players like Huawei.

Apple is now joining the party, a big move in a market that accounts for around 15% of the U.S. tech giant’s total sales.

“If we look back to (the) second quarter of the year, almost half of the smartphones shipped in China had 5G connectivity,” Will Wong, research manager at IDC, told CNBC. “Among the top 5 vendors in China, Apple was the only one without a 5G model. Having a upgrade of 5G will be very important for Apple to continue to attract the attention of the Chinese market.”

China is the world’s largest 5G smartphone market and the country with the most number of 5G connections, according to market analysis firm CCS Insight.

China remains a key ingredient in Apple’s recipe for success as we estimate roughly 20% of iPhone upgrades will be coming from this region over the coming year.

Daniel Ives

Wedbush Securities

The world’s second-largest economy appears to have managed to get the coronavirus under control, and there are signs of economic recovery and a revival of consumer spending.

“In the pandemic era, in terms of recovery, economics and also from pandemic itself, China is ahead of other regions and countries, so it’s important for Apple to stay ahead and upgrade 5G connectivity,” Wong said.

Daniel Ives, analyst at Wedbush Securities, said China demand is the “linchpin to Apple’s 5G supercycle.”

“China remains a key ingredient in Apple’s recipe for success as we estimate roughly 20% of iPhone upgrades will be coming from this region over the coming year,” Ives said in a note on Tuesday.

“To this point we are seeing considerable strength from the China region over the last few months (should be a source of relative strength in the September quarter) with positive trends heading into the all-important holiday timeframe.”

Apple’s iPhone 11 series and the cheaper second-generation iPhone SE have proved popular with Chinese consumers and helped the Cupertino-based company see a rebound in sales in the second-quarter after a tough first quarter.

What iPhone will Chinese consumers buy?

In China, large screen phones are very popular. Therefore, Chinese consumers will likely favor the iPhone 12 and iPhone 12 Pro.

Both devices boast a 6.1-inch display though the Pro version has a higher specification camera and is more expensive.

The iPhone 12 Pro Max, with a 6.7-inch screen, may be too expensive for most consumers in China, Wong says.

In terms of price, the iPhone 12 starts at 6,299 yuan ($934), a nearly 17% premium to the U.S. price of $799. Last year’s iPhone 11 started at 5,499 yuan and commanded between a 10.5% and 12.5% premium, depending on the variant.

The iPhone 12 Pro starts at 8,499 yuan ($1,260) — a 26% premium to the U.S. pricing of $999. The lowest model of the iPhone 12 Pro comes with 128GB internal storage. Last year’s equivalent, the iPhone 11 Pro, which started at 8,699 yuan, came with 64GB storage. So the iPhone 12 Pro is cheaper than the iPhone 11’s starting price upon release.

“I believe the 12 and 12 Pro in terms of pricing and screen size will be more attractive to the consumers. The 12 Pro Max is attractive because of the largest screen size ever, but the price might not be that attractive,” Wong said.

The analyst also noted that the iPhone 12 and iPhone 12 Pro will be available sooner than the iPhone Mini and the iPhone 12 Pro Max, and said it was a “good move.”

A Global Asset Management Seoul Korea Magazine

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