China was a critical growth market for Apple Inc. (Nasdaq: AAPL) even before the latest round of tariffs by President Donald Trump heightened the risk of a trade war between the U.S. and China. However, after visiting Asia and talking to several Apple suppliers, Bank of America analyst Wamsi Mohan is optimistic about Apple’s China business in coming quarters.
Bank of America expects Apple to unveil three new iPhone models in 2018: a 6.5-inch OLED iPhone XS Plus, an updated 5.8-inch OLED iPhone XS and a 6.1-inch edge-to-edge LCD iPhone. Bank of America expects the iPhone XS Plus to be priced $50 higher than the $999 iPhone X, the iPhone XS to be prices around $50 lower than the iPhone X and the LDC device to be priced at $799, in line with the iPhone 8 Plus.
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According to Mohan, lackluster iPhone X unit sales in China suggest the lower-priced LCD model may be extremely popular. Mohan says the LCD model will likely have FaceID, a single rear camera and no home button or force touch.
Looking ahead, Bank of America is expecting Apple to roll out rear 3-D sensing in its 2019 iPhone models, and suppliers indicate that Apple is developing a foldable phone that may double as a tablet and launch in 2020.
Apple stock was under pressure along with much of the rest of the market last week on fears of a potential trade war with China. However, Mohan says China simply has too much to lose to come after Apple.
“Given that a substantial amount of iPhone and other electronics manufacturing is done in China, we do not see this as a particular area of retaliation from a trade context,” Mohan says.
GBH Insights head of technology research Daniel Ives says it’s not in China’s best interest to make Apple its retaliation target in a potential trade war.
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“Given the tightly woven integration between Apple and Foxconn in China, we believe there is minimal risk to this relationship, cost increases and backlash to Apple selling its iPhone devices within China (domestic competition remains a lingering worry), which is a key market opportunity for Apple over the coming years,” Ives says.
Bank of America has a “buy” rating and $220 price target for Apple. GBH Insights has a “highly attractive” rating and $205 target for AAPL stock.
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New LCD Apple Inc. (AAPL) iPhone Could Be Huge in China originally appeared on usnews.com
