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China Smartphone Shipment Drop Hurts Apple (AAPL), Samsung

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China smartphone shipments dropped 6% year over year in March this year. Per China Academy of Information and Communications Technology, the total number of new handsets launched in the market in March 2019 also fell 35%.

Being the largest smartphone market in the world, the Chinese smartphone lull has affected the global growth significantly. The fourth quarter of 2018 recorded the fifth consecutive quarter of decline in global smartphone shipments, with a year-over-year fall of 7%.

The weakness in China’s smartphone market as well as global market has negatively impacted leading smartphone vendors, including Apple (AAPL - Free Report) , Samsung , Motorola (MSI - Free Report) among others.

Global Smartphone Market: Prospects Dim

Globally, in the last quarter of 2018, Samsung recorded a decline in its market share for the fourth consecutive quarter, to 18%. However, its market share remained flat year over year.

In the same quarter, Apple’s share of the global smartphone market was 17%, down 1% year over year. The iPhone maker’s neck and neck competition continues with Huawei, which, with a 5% year-over-year gain, is rapidly expanding its presence.

Another player which has been affected by the slowdown is Motorola, which carries a Zacks Rank #3. The company lost 1% share year over year and currently constitutes 2% of the global smartphone market.

Apple Struggles in China

Slowdown in China’s economy has negatively impacted shipments.  Recently, China cut its outlook for economic growth to 6-6.5% for 2019. Moreover, the U.S.-China trade war impacted the Chinese market adversely.

Apple has been hurt by these factors. Also, demand for its premium priced iPhones continues to decline, which is a headwind.

Apple which currently carries a Zacks Rank #3 (Hold), witnessed a sharp decline in sales in the Chinese market late last year. Per IDC, iPhone sales in the country fell 20% year over year in the fourth quarter of 2018.

Moreover, the steep pricing of new iPhones is resulting in Apple losing considerable share to Xiaomi, which offers devices of similar features at a significantly lower price.

Also, Huawei is gaining traction in the Chinese market, following Samsung as the world’s largest smartphone maker.

On top of this, in 2018, Huawei, Oppo, and Vivo each constituted a large part of the flagship smartphone market, a segment once dominated by Apple.

However, the iPhone maker recently slashed prices of most of its flagship devices due to lower VAT. This will make its products more affordable in China, and is expected to benefit the company.

Apple Inc. Price and Consensus

Apple Inc. Price and Consensus | Apple Inc. Quote

Google Pursuing Market Share Through Pixel

Reportedly, Alphabet’s (GOOGL - Free Report) Google has confirmed that it will launch latest Pixel smartphones by mid-2019. The company is geared up to roll out new devices at the Google I/O 2019 from May 7, which in turn will aid in popularizing the device.

Google parent Alphabet currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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