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Competition between Apple and Huawei in China

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The intensifying competition between Apple and the Chinese consumer electronics giant Huawei has garnered significant attention. However, according to Evercore analyst Amit Daryanani, investors should remain optimistic about the prospects of the iPhone maker.

In the fiscal year 2023, China contributed a substantial $72.6 billion to Apple’s total revenue of $383.3 billion. Nevertheless, due to government restrictions and an uncertain economic environment, Apple has faced challenges in the Chinese market.

Moreover, Huawei’s presence in China poses a competitive threat to Apple. The recent Singles Day sales event showcased Huawei’s strength as it achieved high sales growth, while Apple experienced a decline in unit sales compared to the previous year. However, Apple has yet to respond to these developments.

Daryanani believes that concerns about Huawei’s impact on Apple are exaggerated. In a research note, he stated that the perceived risk is overstated, which is why he rates Apple as Outperform with a target stock price of $210.

Notably, Apple’s shares have risen by 47% this year, with an increase of 0.4% to $190.51 on Tuesday. Daryanani cites Huawei’s aggressive price cuts and Apple’s supply constraints as factors contributing to Huawei’s better performance during the Singles Day event. He emphasizes that limited supply rather than significant market share loss caused the decline in unit sales for Apple.

Although Apple only holds a 15% market share in China’s most recent quarter in terms of unit numbers, it commands approximately 37% of market revenue. Daryanani highlights that while Huawei focuses on lower-end smartphones, Apple prioritizes the higher end of the market. He argues that Apple’s loyal and less price-sensitive customer base in this segment will help the company maintain its share despite Huawei’s growing competitiveness.

In conclusion, while the competition between Apple and Huawei in China remains intense, Daryanani reassures investors that Apple is well-positioned to thrive in this challenging landscape.

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