Apple Inc. ’s market share could decline by around 20% in Japan over time with “trouble brewing” in its highest margin country, said UBS in a note Tuesday. UBS suggests the investors, who are concentrating on Apple’s recent struggles in China, should move their focus on Japan, which accounts for about 8% of Apple’s revenue.
“Trouble brewing” in Japan
A number of competitive and regulatory factors in Japan could be a cause for concern, notes UBS. Analyst Steven Milunovich and Benjamin Wilson at UBS, said “there is some trouble brewing, though, that we believe could affect Apple’s growth. First, Japanese carriers are no longer as aggressively using discounts on handsets to lure subscribers from other carriers, which could affect phone sales.”
The Japanese government has expressed concerns as well over mobile carrier’s charging high. The government is looking into ways to reduce this. The carriers first subsidize the handsets and then claw back the money through high tariffs. Apple would be affected if the government cracks down on the high prices, as the US firm charges a 15% to 20% premium on the iPhones relative to the US, the analysts noted.
Citing industry contacts, the analysts said the Apple Inc. brand remains strong, but cheaper alternatives are making inroads with Apple’s share potentially dropping over time from 50% to 30%.
MVNOs can be problem for Apple
UBS also noted that the increasing influence of Mobile Virtual Network Operators (MVNOs) could be a problem as well. MVNOs are the mobile carriers, who use other networks’ infrastructure. MVNOs offers SIM-only services, but at lower rates. Rather than buying through a carrier contract, people tend to buy their own device outright, and this could hit the US firm.
UBS says there could be more than 5m MVNO subscribers, and they are likely to hold onto old phones longer. “So there is a potential double whammy to Apple of handset share loss and longer upgrade cycles,” UBS notes.
This year, Apple Inc. shares are down over 12% with investors worrying over growth struggles in China. The investors are also fretting about the upcoming iPhone 7 – if it will be a hit or not. The tech firm has tried to reduce the fears of the investors by expanding its presence in other markets such as India. Also, the US firm is boasting the success of its services such as Apple Music, which according to analysts is a key to its future revenue growth.
On Tuesday, Apple shares closed up 1.68% at $93.59. In the last three-months, the stock is down over 11% while in the last one-year, it is down over 26%. The stock has a 52-week high of $132.97 and a 52-low $89.47.