At Last Confirmation! 'Missing Million' iPhone Surge Sales Q1 Was in China

I have been waiting for the confirmation and CNBC just said that the total cumulative sales of iPhones on China Unicom has passed 2 million. It was 400,000 by the end of 2009. As regular readers know, all analysts who offered a forecast number of iPhone sales going from Christmas Quarter Q4 sales of 2009 to the Jan-Mar quarter of 2010 (including me) had forecasted a decline in sales. Absolutely every analyst expected a decline (because previous years there was a clear decline after Christmas). And even the USA sales of AT&T showed that exact pattern again in 2010, so it was a 'reasonable' expectation. But there was a mystery 'missing million' iPhone sales in Q1 which was obviously international sales.

I took it to task to study where it was and did some math on Apple's results and its published China numbers. I concluded that missing million was China sales related to Lunar New Year / Chinese New Year sales. I also then found that Nokia reported a Q1 'Chinese New Year' related gift-giving period bonus sales (Nokia Q1 China sales were strongly up, and now in Q2 it was China which is strongly down, also showing a big seasonal jump). The reason we haven't seen this before in China in smartphones, is that it was only in 2009 that China started its 3G networks and the iPhone was introduced late in 2009 for China.

So I promised I'd track the industry and wait for the numbers. Now today CNBC has just said China Unicom cumulative sales of iPhones has passed 2 milliion. As the international sales of iPhones are down 14% from Q1 to Q2, its fair to assume the majority of the new Chinese sales of 1.6 million iPhones were in the first quarter, not the second quarter of 2010. The 'missing million' has been found and now verified.

So now we know there is a 'new' pattern of iPhone sales. Big growth Q3 when the new iPhone has been introduced. Roughly similar level sales in Q4 for Christmas (Western country gift-giving season) and perhaps similar level sales in Q1 of the next year for Chinese New Year gift-giving season. And then a decline of sales in Q2 before the new iPhone model is released.. 

And who told you first haha.. (yet once again, they again ridiculed me..) 

Comments

[sami]

Speaking of China, so you think Apple will change the name of the Iphone 4 before launching in new Asian markets? "4" being considered very unlucky and I4 having faced it's share of misfortune (losing the prototype, antenna problems, inability to produce white model etc)... Has the linkage already been made in the HK I4 media coverage?

[Timo Koola]

@sami And not to forget that white is the color of death. This is stuff that Nokia is very good at. They have been very careful in avoiding the number four in their products. Doesn't promise too good on Symbian^4 though. :)

[David Albert, MD]

Tomi, thank you for your insights. I would really like to hear your views on RIM and Nokia. Despite being the US (RIM) and Global (Nokia) smartphone market share leaders, analysts are seeing bad times ahead for both in the face of Android and iPhone. Please give us you view. I may not agree with you but I will never ridicule you.

Dr Dave Albert

[sami]

I wonder where CNBC has gotten their info. SinoCast says 700 000 by end of June. I heard similar number elsewhere, I think on Bloomberg so I believe it's between 500 000 - 1m.

http://www.tradingmarkets.com/news/stock-alert/aapl_chuff_china-unicom-to-finalize-details-of-introduction-of-iphone-1070981.html

The article DOES mention the 2m number you quoted, though it's the number they were supposed to sell within a year. Maybe that was what CNBC talked about?

Sorry Tomi, I'm not convinced that missing million is confirmed.

[Tomi T Ahonen]

Ah ye, of low faith..

So yeah, what do I need to do? To me the facts were clear in April. To me this now settles it. If I look at the numbers - from Q4 of 2009 the non-USA sales of iPhones grew to Q1 - and then declined in Q2. Meanwhile the USA sales of iPhones from Q4 declined to Q1, and now increased to Q2. Clearly there was a strange bump that had not been seen in Q1 ever before for the iPhone, and counting industry growth vs Apple in that period - there is an unaccounted for 1.1 million iPhones that suddenly emerged as sales in Q1 outside of the USA that disappeared in Q2. Well, if that was Europe, why the sudden vanishing in Q2? I think its clear that was China. Nokia said in Q1 that they saw a surge of smartphone sales for China Lunar Year gifts. Now we see the surge has passed for non-US rest-of-world and iPhoen numbers declined. I think the case is closed.

You don't have to believe me. You can believe in anything you want, in fairy tales, in santa claus, in the easter bunny - or that iPhones do not sell a gift-giving pattern in China in Q1. To me the numbers are now clear.

So Piot and sami - to me the matter is closed. If this is not enough for you, probably nothing ever will be.

Onto the other comments

sami (first comment) - on the number 4. I certainly have heard many times here in Hong Kong and in my various trips here in Asia from many colleagues that the number 4 is not a good omen. It is funny, coming from Finland, how 'rational' we tend to be in our education system and believing in the scientific method etc, but that there are many other cultures with different systems and clearly here in Asia there are very many who believe in various more mythological systems, including the relevance of numbers. I don't want to call them 'supersticious' but I do observe the difference in what one might think of.

Timo - yeah, good point about white.

Dr Dave - thanks. A very quick view on RIM and Nokia vs Apple and Android. The 'conventional wisdom' that suggests that Apple is stealing customers from RIM or Nokia is patently wrong. That is purely based on beliefs and not on the facts. The opposite is true. With Android the treat is real. Android has more than doubled in one quarter as many of the global giants have gotten their Android products into the market (Samsung sold half a million Galaxys in just the South Korean market, its first launch market, in Q2; LG and Lenovo have brought their Android phones to the market, and many Android makers like SonyEricsson, HTC and Motorola have expanded their lines).

Here the victim has mostly been Apple - hurt most by Android so far (and obviously also Windows Mobile been hurt by Android). Nokia still grew both unit sales and market share, so Android is not eating into Nokia, but RIM grew unit sales but not market share, so RIM is potentially feeling the heat, although not really hurt (yet). Note that Samsung launched Bada and sold more than a million Wave phones in Q2, I would say Nokia's big rival is Bada low cost smartphones, not the high price Androids.

RIM is very heavily misunderstood by the US press. They think the QWERTY form factor is 'outdated' and somehow RIM is 'losing' the battle to Apple and Android. While the facts show RIM is growing sales and its QWERTY form factor is gaining popularity by the most demanding customers - the youth. I think RIM's prospects are good, and it takes dedicated QWERTY phones to go head-to-head vs RIM and even then the Blackberry Messenger platform will help secure RIM's youth customer base. The battle is not for the enterprise market, where Apple and Android are irrelevant - that battle was fought by RIM and Nokia E-Series and Windows Mobile - and is the most stable and non-dynamic of any market segment in smartphones.

Nokia is escaping the bloodiest battle at the top of the price wars into the low cost where most rivals cannot follow. Just LG yesterday reported they went from profit making to loss making as they try to follow Nokia and Samsung into lower cost smartphones. Only Nokia and Samsung are able to survive there, due to their immense scale advantages. At the top we see many casualties including Palm, Google Nexus, Microsoft Kin (even though youth phone, was priced like a luxury phone and failed) and now Vodafone's 360 smartphones running Android. The wars at the top end are brutal. I do think it will be a big battle for the global lead between iPhone and Samsung Galaxy and HTC and Nokia N8 in the second half of this year, and roughly speaking, those four should split that market segment, with iPhone the biggest share but not even half of that market. So my gut says, where Nokia was under-represnted at the top, they will make somewhat a comeback. And the strongest horse in that race currently is Samsung's Galaxy, seems to be the hit phone of 2010. HTC would do better if they had the global footprints of Nokia and Samsung, but even then, HTC landed China Mobile (vs iPhone on China Unicom) so HTC will probably outsell Apple in China just because of this..

I could go on speculating, but please come back and follow the blog stories here entitled 'bloodbath' - they related ot the smartphone wars.

Thank you all for writing

Tomi Ahonen :-)

[sami]

Well Tomi, thanks for your reply. I've read your blog and found it very informative and fact based, unlike

So I run into this bit of news that the sales of Iphone in China have been in the region of hundred of thousands so far. I though, well this would contribute nicely to this nice blog I like to read.

Apparently not. You compare that data to "fairy tales, in santa claus, in the easter bunny"? Are you serious? China Unicom sold 700k Iphones by end of June. That's reported fact. That's not fairy tale, that's not santa claus, that's not easter bunny.

Bloomberg says Unicom sold 500 000 this year, previously China Unicom reported 100 000 sold by end of October 2009. Now we know that the Iphone sales are generally higher when the sales being and then begin to level off, so 200 000 sold in 2009 is definitely plausible. OK and Bloomberg reports 500 000 first half 2010.

Ok, now we have two sources, one Chinese (I don't know how reliable it is), one western, definetely considered to be among the more reliable financial news agencies, both reporting about the same number. Against Tomi the analyst with "clear numbers". Hmmm. Case closed? Really?

Ok, lets go even further, Marketwatch reports that the Iphone sales accelerated beginning of May 1, due to a drop in monthly bill of the Iphone plans, doubling from April. China Unicom may well made a good part of the sales of the 500 000 Iphones in May-June. Not for Chinese New Year gifts.

[kevin]

Tomi,
Possibly what you write about RIM and BB not being hurt by Android and iPhone is true outside the US.

In the US, BB still dominates corporate and government buying. But among consumers and especially youth, BB is not popular because carriers require $30 or $35 data plan for BB, which is the same as iPhone and Android phones. Cheaper 3G phones from LG/Samsung and others offer qwerty texting with $10/15 plans, so those are very popular with teens.

[Tomi T Ahonen]

I did say the case was closed. The facts are coming from everywhere. Canalys gives CHINA smartphone numbers for Q2 (not for Q1 unfortunately). Apple did not make the top 3 smartphone makers. Third place Samsung sold 280,000 units. So iPhone in Q2 is less than that, at 275,000 max. So the silly numbers by non-analysts like 500,000 iPhones in Q2 are ridiculous.

China Unicom told us 100,000 in first month, 400,000 by end of year 2009. That means 300,000 in Q4. Now in Q2 we have sales of at best 275,000. But 2 million total in China. That means 1.3 million were sold in Q1, which is PERRECTLY consisent, a steady sales of 300,000 iPhones in Q4, Q1 and almost that in Q2 as the 'baseline' sales, and 1M extra sales in Q1 for Lunar New Year.

This matter IS closed to me. All the actual DATA on China is consistent. You do not have to believe these numbers, but dont' waste my time here. Go elsewhere to waste peoples' time. THIS matter is closed.

Tomi Ahonen :-)

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