Apple Inc. (NASDAQ:AAPL) has China to thank for its record first quarter earnings that were driven by impressive sales of the iPhones in Asia’s largest marketplace. The biggest concern at the moment is whether the giant hardware company will be able to sustain its 70% growth in China amidst regulatory pressure and competition from local brands. During an interview on CNBC, Creative Strategies President, Tim Bajarin, said that Apple continues to put more effort on China on belief that it is set to be a key driver for growth going forward.
The growth in demand in China is a great achievement for the Cupertino-based company given the high selling prices for the devices. Good planning as well as a change in consumer trends continues to work to Apple’s advantage in some of the key markets where demand continues to grow.
“Our predictions were that they would do 72.5 million so we were even lower but we were higher than the street. Partially because we saw strong demand in China and one surprise there I even the iPhone 5C was still selling strongly in Q4. […] There is tremendous pumped up demand for the iPhone around the world; the 4-inch and 3.5-inch was great for a long time but when you move it up to the 5-inch and the 5.5-inch the demand was off the chart,” said Mr. Bajarin.
With a big cash pile at its disposal, Bajarin believes Apple Inc. (NASDAQ:AAPL) may use part of the money on small acquisitions that are to be used to spur growth going forward. The analyst is also not discounting the fact that Apple may look to return part of the money to investors as part of its dividend structure.
Scrutiny from regulators is sure to be the biggest headwind that Apple Inc. (NASDAQ:AAPL) will have to grapple with in the attempt of further expanding its presence in China. Brand loyalty is slowly creeping in, in China, something that is good for Apple despite increased regulatory pressure over the devices security aspects.
“Right now Apple Inc. (NASDAQ:AAPL) position is pretty strong in the context of what they sell how they sell it and resisting such kind of pressure. At the moment, the perception in China from our own research shows that even the middle class are still looking for what we call aspiration smartphones. These are products that they really want and as their earning power changes they go up to scale,” said Mr. Bajarin.
Xiaomi might be gaining ground on the lower-end markets in terms of device sales but Apple according to Bajarin is also gaining great deal from the sale of devices in the middle to the high end markets because of aspirations.
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