China Mobile Phone Shipment Data for July is 'Incremental Negative' for Chipmakers

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By Senad Karaahmetovic 

According to the China Academy of Information and Communications Technology (CAICT), the number of smartphones shipped domestically was 19.12 million, down 31% YoY and 30% MoM.

China-branded mobile phone shipments were 18.28 million, down 29% YoY. Non-China branded mobile phone shipments (e.g. Apple’s iPhone) were 1.63 million, down 42% YoY.

Apple's (NASDAQ:AAPL) share of shipments fell to 7% from 10% in June, but still up 3% compared to a year-ago period.

"Apple shipment share is typically soft ahead of the launch of a new iPhone," an UBS analyst said.

"Shipment share does not correlate to sell through share as we estimate iPhone sell through share in China during July/YTD was roughly 14%/16% respectively (Source: Counterpoint)," he added.

The analyst also reminded investors that the iPhone 14 launch event was one week earlier than for iPhone 13 last year, which should result in more “noisy” iPhone shipments into China in August and September.

As a result, the analyst left his September estimates unchanged for iPhone units.

A Wells Fargo analyst believes the CAICT data "is an incremental negative data point, and brings into question how well China is recovering from COVID-mitigation restrictions."

For the analyst, the July data is especially negative for chipmakers, including Qualcomm (NASDAQ:QCOM), Qorvo (NASDAQ:QRVO), and Skyworks Solutions (NASDAQ:SWKS). Qorvo is highlighted given its high exposure to Chinese brands.

"The data also shows 5G mobile phone unit sales actually decreased as a percentage of overall China domestic unit shipments, with 5G units comprising only 74% of units shipped in the month of July (vs. 80s% in Apr-Jun). This is particularly important for QCOM, QRVO, and SWKS, which are all exposed to the 5G product cycle playing out," the analyst added.