NEW YORK (TheStreet) -- Apple's (AAPL) primary revenue driver is of course, the iPhone. That's not a secret, as it accounted for 56.4% of revenue in Apple's most recent quarter. Concerns that the smartphone market are slowing, particularly at the high-end, may not be as well-founded as commonly accepted.
Morgan Stanley analyst Katy Huberty (she of the first question on all of Apple's earnings calls) notes that her AlphaWise Smartphone Tracker compiled data through March 15, and the data actually shows that shipments are ahead of estimates not only for the iPhone, but Samsung's Galaxy phones as well, though the mix will shift toward lower priced phones. Samsung uses Google's (GOOG) Android operating system.
In the note, Huberty states Morgan Stanley's Asia Tech analyst, Jasmine Lu, expects the supply chain to build between 38 million and 39 million iPhones for Apple's fiscal second-quarter, which is in line with Huberty's 38 million estimate. However the AlphaWise Tracker shows demand of 42 million iPhones. There's several reasons for that, Huberty notes:
(1) Supply chain production tends to lead Apple's revenue recognition, so as iPhone production declines from its peak in C4Q13, demand could outstrip supply. (2) New US carrier promotions in C1Q14 driving incremental demand vs. late 2013 when carriers strictly enforced their 24-month contract terms. (3) Similarly, several large US retailers ran iPhone promotions this quarter, including Walmart and Best Buy.
Part of this demand might be coming from China, alluding to Apple's recent deal with China Mobile (CHL), though Huberty expects China to have tougher comparison in the calendar first quarter of this year due to earlier iPhone releases there. However, demand in the U.S. actually appears to be improving as well. On Apple's fiscal first-quarter earnings call, CEO Timothy D. Cook noted demand in North America was weak, due in part to upgrade changes at the wireless carriers. "We believe demand in the US improved due to carrier and retailer promotions," Huberty wrote in the note. "Western Europe benefited from a better macro environment. NTT DoCoMo's launch in Japan boosted demand in the region."
Tuesday, Apple unveiled a lower storage version of the iPhone 5c, with 8GB, to appeal to some of the aforementioned markets, including China.
As for Samsung, Huberty says Galaxy demand is tracking toward 41 million units, down 11% sequentially. There's a slowdown of the Galaxy S4 and Note 3 shipments, but the S4 variants, (Active, Google, Mini, Zoom, Mega) and lower-priced versions are helping drive demand. "We expect Samsung to ship about 91M (+4% Q/Q) total smartphones in C1Q14. Therefore, volume is likely to beat consensus in the current quarter but overall mix will be weaker due to lower-priced phones and mix shift towards China."
-- Written by Chris Ciaccia in New York
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