Apple aims to sell 85-90 million new iPhones by the end of 2015 : WSJ

10 Jul 2015 | Author: | No comments yet »

Apple Will Be Fine in China, Says UBS.

But the Chinese stock market has been on a roller-coaster lately, rising to lofty heights earlier this year before losing a third of its value over the past month.SAN FRANCISCO (Reuters) – Apple Inc’s AAPL.O stock was heading toward its first five-session losing streak since January on Thursday as investors worried about the economic health of China, a key market for iPhones.

That is the main question that arises from a report by The Wall Street Journal that Apple is stepping up production plans for its next iPhone, even compared with the record-busting launch of the iPhone 6.UBS’s Steve Milunovich today reflects on the sell-off that’s been happening in China’s stock market, and wonders what it bodes for Apple (AAPL), which has lately been doing very well in the Chinese consumer market.Apple is preparing for a larger initial production run of its next iPhones, betting even modest hardware changes will entice consumers to upgrade and outstrip demand for the larger-screen phones released last year. In the first three months of the year, for the first time, Apple sold more iPhones in China than in the United States, a trend expected to grow as Chinese consumers upgrade from less expensive handsets. Milunovich, who has a Buy rating on Apple stock, and a $150 price target, thinks Apple will be fine, given stock gains are a low percentage of average household income in China: A slowing Chinese economy is a risk for Apple.

Apple is asking suppliers to manufacture between 85 million and 90 million units combined of two new iPhone models with 4.7-inch and 5.5-inch displays by December 31, say sources. Their conclusion: if the turmoil is confined to the stock market, there will be “limited impact.” The possibility that the Chinese economy slows down is the real risk, they say. The loss of this quick gain may not be as important for consumption as it could have been if the gains had been achieved over a longer period of time, since there is little evidence of earlier stock market gains substantially affecting household consumption. The Apple Watch is not seen as significant for profits in the short term but the wrist-worn gadget is Chief Executive Tim Cook’s first major product and its failure would be poorly received by Wall Street.

Hon Hai Precision Industry, also known as Foxconn, which had long been Apple’s primary assembler, was recruiting at its main iPhone production base in China in anticipation of a mass rollout of the new phones from next month, source said. A survey of Chinese customers by CLSA found 60% of iPhone owners are currently using iPhone 5S or older, indicating a large potential base for upgrades to the next model. That’s a risk, though Credit Suisse CS 2.17 % noted Thursday that equities represent less than 10% of household wealth in China, compared with nearly 30% in the U.S.

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