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AppLovin Data Desk January 2015: Chinese iPhone 6 Plus Appetite has Apple Seeing Green

by John Krystynak on Jan 21, 2015

Uptick in iPhone 6 Plus Sales in China Could Spell Strong Earnings for Apple For the third installment of our Data Desk series, we look at how the US holiday sales and increased availability of the iPhone 6 Plus affected its market share in two of its biggest markets – the US and China–with a specific focus on China. The relative market share of the 6 Plus is so important, particularly in China, for a few reasons. First, UBS estimates that for the first time ever, iPhone sales in the December quarter in China outstripped those in the US. Plus (pun intended), Morgan Stanley estimates that the 6 Plus’ profit margins are as much as 61% higher than that of the iPhone 6. From data we have collected and corroborating third party reports, it seems China’s ravenous appetite for the 6 Plus will buoy Apple’s next reported earnings.

In our last report, the US had an 80/20 iPhone 6 to iPhone 6+ ratio, while China was at 65/35 in favor of the iPhone 6. As more iPhone 6 Plusses became available for purchase over December, China’s 6/6 Plus ratio moved to 60/40, respectively, while the US also shifted 5 points in favor of the 6 Plus to 75/25.

Applovin_UsageThreePeriods_USChina_ChartThis much movement in two of the largest smartphone markets is significant, especially if you consider that these new ratios aren’t just for new sales of devices. Because the original devices sold in the first month and a half of the availability at a 80/20 or 65/35 pace are still active–the new devices added have to dilute the original ratios. For example, the ratios of new iPhone 6 models sold now in China could be approaching 55/45 (6/6 Plus), but the overall ratio is less influenced because of the original iPhones (sold at a 65/35) ratio are still in use. Put another way, imagine a bathtub half-filled with lukewarm water. If you add a liter of scalding hot water to the tub, you’ll only raise the overall temperature by a few degrees. In this analogy, the lukewarm water is the current temperature of 6/6 Plus usage. The scalding hot water would be the ratio of recently activated devices.

To visualize this trend, we looked at the day-to-day ratios in China. The 6 Plus is growing in popularity, but starting to plateau. Although its growth rate is slowing, this is to be expected as the overall pool of iPhone 6/6 Plus gets bigger and bigger. It’s also important to note that the 6 and 6 Plus weren’t officially on sale in China until October 17, 2014. This explains the volatility in the numbers before then–the large spikes and swings are due to the scarcity of black-market or otherwise obtained phones representing just a small pool out of the billions and billions of ad requests from Android and other Apple devices from which we are sampling.Applovin_DaytoDay_Chart

Applovin_UsageThreePeriods_USChina_ChartLastly, it’s important to know that at AppLovin we focus on usage and that’s what we are measuring here, not unique devices. So difference in device ratios can mean different usage habits. The popular Pocket app found that screen size did indeed influence how people interacted with content on their app–but these are just the usage patterns for one app whose primary market is the US. While we can’t say how much is attributable to different usage patterns or new device activity, the trend is clear–the iPhone 6 Plus is booming–and all indications are that demand for this device outstripped supply by a wide margin.

We aren’t financial analysts and are not giving investment advice. Having said that, all indications (our data and that of analyst reports) are that Apple’s December quarter was a big one. We believe this for three reasons: the 6 Plus’s usage is trending upward (implying an uptick in sales) in China; China has emerged as Apple’s biggest market for mobile phones; the iPhone 6 Plus has a higher margin than the iPhone 6, and will likely influence the ASP of the iPhone.

It’s hard to envision a scenario where Apple doesn’t have a blowout quarter, so join us Tuesday as we grab the popcorn and await the final numbers.

 

John Krystynak is AppLovin’s Chief Technology Officer.

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