×

Apple's growth in China: As good as it gets?

503755391LX00008_CHONGQING_
Getty Images

China was a knockout success for Apple in the fourth quarter where demand for its latest iPhones propelled a 70 percent on-year rise in revenue, and analysts are now tipping the first quarter to be even better.

Gift-buying in the lead up to Chinese New Year holiday, which falls on February 19-20, will likely drive iPhone sales even higher this quarter, say analysts. The first quarter is typically the strongest for smartphone sales in the mainland due to the holiday season.

"Apple has not yet reached its maximum level in China. January and February is the big shopping season leading up to Chinese New Year," said Tom Kang. "I think the first quarter may be even bigger than the fourth quarter for Apple."

Apple generated $16.1 billion in revenue from Greater China– which includes China, Hong Kong and Taiwan – in the three months to December – up from $9.5 billion in the same period a year earlier. The region accounted for 22 percent of the company's overall revenues.

According to data firm Canalys, Apple was the top smartphone vendor in China in terms of units shipped in the fourth quarter, surpassing rivals Samsung and Xiaomi for the first time.

"This is actually all done ahead of the Lunar New Year, so clearly you've got more momentum going into what's going to be a critical first quarter in China for Apple," said David Garrity, principle at GVA Research.

The 4.7-inch iPhone 6 and 5.5-inch iPhone 6 Plus - released in September - have been a hit among consumers across Asia, where there is a growing preference for phablets – or smartphones with a screen size of 5-inches and above.

Read MoreApple posts blowout quarter, will ship Watch in April

For example, the iPhone maker captured a record 33 percent of smartphone sales in Samsung's home market of South Korea in November, according to Counterpoint Research, the first time a foreign brand has exceeded the 20 percent market share in the history of the country's smartphone industry.

"Apple's phablet really hit the sweet spot in East Asian markets, where screen size is critical," said Tom Kang, research director at Counterpoint Research.

Beyond the first quarter

After the first quarter, Apple's blockbuster growth in China is likely to cool.

The bulk of consumers waiting for the iPhone 6 and iPhone 6 Plus would have likely made their purchases by the end of the first quarter, so growth will be more gradual thereafter, said Kang.

"Unless, they come out with a mid-range iPhone…below $300," he added. "If they had a mid-ranged iPhone, they would probably reach 40-50 percent market share in China – levels seen in U.S. and Japan."

Kang, however, doesn't think Apple will head in that direction any time soon.

For now, Apple needs to work on keeping consumers in the mainland loyal to its brand, he said, to prevent flip-flopping between iOS and Android devices.