Apple will ensure iPhone X demand is met, China could be a big market for it: GVA Research

BNN speaks with David Garrity, CEO of GVA Research, the day the iPhone X officially goes on sale and a day after Apple’s latest quarterly release.

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We heard from one tech analyst who says the key issue for iPhone X is going to be supply, not demand. What’s your take?

AAPL CEO Tim Cook has been downplaying iPhoneX delivery capabilities while indicating that, “The ramp for iPhone X is going well especially considering that iPhone X is the most advanced we’ve ever created, and it has lots of new technologies in it. So we’re really happy that we’re able to increase week by week what we’re outputting. We’re going to get as many of them as possible to customers as soon as possible. I can’t predict at this point when that balance will happen.” Meanwhile, iPhoneX demand appears solid with orders being characterized as somewhere between “off the charts” and “very strong”.

It seems iPhone X is not causing a drag on iPhone 8, based on the latest results. Are you surprised? Or do you think the sales of iPhone X are being overstated?

It appears that the features AAPL has put into the iPhoneX have served to sustain consumer interest and demand despite the $1,000 price point and the faster delivery availability of the iPhone8. That said, with price points rising and the incremental difference between succeeding smartphone releases becoming more incremental, the industry as a whole will have to address long term the fact that consumers are extending their smartphone replacement cycle. Meanwhile, what was a positive surprise from Sept 2017 quarter results is China revenues returning to growth after 6 consecutive quarters of Y/Y declines and India revenues doubling Y/Y.

How capable is Apple diversify and make money beyond the iPhone?

AAPL is making a concerted effort to grow high-margin services revenues and in this regard the most recent results were no disappointment.  Adjusted Services revenue grew 24% Y/Y,accelerating from 22% in recent quarters, despite a tougher compare. In the quarter, App Store revenue reached new highs while Apple Music paid subs grew 75% Y/Y, iCloud saw double digit growth in MAU and revenues, and the number of paid subs across Apple’s services offering increased to 210M, from 185M last quarter (+14% Q/Q). As reported, Services revenue grew 34%, boosted by a one-time $640M adjustment based on new information from partners. The adjustment happened over multiple Services categories. Given many services – App Store, iCloud, Apple Music – are purchased directly on Apple’s platform, we believe the adjustments more likely associate with Support sold through partners and/or TAC-type payments from partners.