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Apple Will Grow Stronger Than Expected In China Due To Facts That Americans Omitted.

|Includes: Apple Inc. (AAPL)
Summary

Apple's key market growth remain in China.

China middle class population and it's saving rate is out of Americans' imagination.

China's market share is not "taken" by competitors, the people that use Iphone are still growing.

While Apple is common in US, it remain premium brand in China. Thus vast potential.

The founder AKA Chinese Buffett of Apple biggest "competitor" in China- BBK Electronics, is a large shareholder and biggest Apple fanboy.

Hi everyone, this is my first article in seeking alpha. I'm Singaporean Chinese, as you can notice. My English writing skill not good and probably grammatically bad. All criticism regarding language are welcome, but please be gentle.

there are many people from China who are working in Singapore. It is a huge community here. It gives me insight of their technology product preference.

As a reader of seeking alpha, when reading article about Apple stock (NASDAQ:AAPL), I found that many people might not know what is going on in China, which is Apple's key market. What I'm writing is some facts with some opinion. So that SA community can get some new perspective. However, Please feel free to counter-fact me if you find some info which is contrary and please shoot holes in my ideas as much as you could.

Many analysts have the idea that Apple has hit a ceilling in China. I simply disagree with that. I think it is in the still in early growth stage and there is huge profit potential awaits. Not long later China will be apple's biggest profit generator.

First, let me explain to you about some of the "Chinese cultures" which will affect Apple's business.

-Love bargain.

-Have affinity of things that is scarce.

-They care about "face" alot.

All of the chinese smartphone company know the popolation's love of bargain, and what they did is to sacrifice thier margin and burn cash in order to gain the market share, and they did. Just look at Oppo's phone, it is exacly the same design as iphone's. However, it is thier winning fomula. Iphone is so expensive to many of them. They do not mind buying a copy-cat as long as it is similiar.

They have affinity of the things that is scarce, it is premium to them, the less percentage of people have it, the more premium it is. When it is so popular that everyone has it, they usually call the product "Street's rotten". In addition, Iphone is so expensive to so many people in China some even call it "iKidney 6 or 7", basiclly means you have to sell your own kidney in order to buy one(in fact, two people in yangzhou had gone to hospital hoping to sell their kidney for iphone), There's also alot of stories in china about people constantly selling thier blood in order to save money for the phone. This is how crazy there. Your phone that you and your friends are using, it is normal in US. But in China, they represent privilege, Identity, a high end premium product.

Quality matters but differentiation in terms of look matters most. This is why iPhone 7 is not growing at the rate of iPhone 6 there. However, I think iPhone 8 will be a game changer. The positioning of the product in Chinese people's mind is still similar to US' when Steve job released the first iPhone.

All the news and article about Apple is losing, dying, slowing...etc in China. Does NOT makes any sense.

Competitors have gain share of the market that is alot faster then they used to, It is not really a bad thing to apple as long as they getting all the profit and continue to remain the pricing power. I also believe that growing software revenue what is high in profit margin will offset the likely decrease of hardware margin. The people who use appstore is simply have more spending power and going to spend more than people who use google play, common sense.

Now lets talk about China's middle class that Tim Cook is so enthusiatic.

China had an urban population of 730 million people as early as 2015. So lets assume that no one is going to move into the city, by 2022 over 550 million people in China will be considered middle class. What is the total population of US? 323Million in 2016 just for your comparison. China elder generation love saving and thier saving rate is one of the highest in the world. China's savings is commonly quoted between 30-35%, while the USA households around 5%.

The new generation of China is bigger spender compare to thier parents. As a result, China will transform from export ro comsumer driven economy just like US.

Duan Yong Ping, founder of BBK Electronic and secretive billionaire aka Chinese Buffett, is huge fan of Apple. It is no surprise that vivo and oppo have almost same design as iPhone! He has a blog in chinese, those who know how to read mandarin should google it and check it out. The blog is full of wisdom in investing and business. In his blog, he wrote alot about apple stock and his opinion about why it is an amazing stock to invest. He also hates it when media twisted his word and said that Apple is "beaten" by him in China. Sounds crazy for vivo/oppo's boss to do that? it is just reality.

I'm not going to tell you how many phones apple is going to sell. Because I don't know. I'm not fortune teller nor I have crystal ball like many analysts.Just to give you based on Apple (AAPL) brand status in China, what is the possible outcome in such situation. I'm also not posting any statistic and chart because I do not want to get in possible trouble to post other companies' work. I know it is a badly written article but this is my first one anyway. Nevertheless, Thank you for reading it!

Disclosure: I am/we are long AAPL.