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From: Richard Kahn Sent: Thursday, Decem er , : To: jeffrey E. Subject: Fwd: Apple, Inc.: iPhone X Accelerating Apple Share Gains in China Richard Kahn HBRK Associates Inc. 575 =exington Avenue 4th Floor New York, NY 10022 Begin forwarded message: From: =/b>"Morgan Stanley' Subject: =/b>Apple, Inc.: =Phone X Accelerating Apple Share Gains in China Date: =/b>December 21, 2017 at 12:24:04 =M EST <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> Wealth =anagement <http://www.morganstanley.com/img/cs/spacer.gif> Apple, Inc.: iPhone = Accelerating Apple Share Gains in China <http://www.morganstanley.com/> EFTA_R1_01794354 EFTA02604431 Katy L. Huberty, CFA =E2 Morgan Stanley December =1, 2017 5:01 AM GMT Initial iPhone X data points =n China highlight faster adoption vs. iPhone 8/8 Plus and increasing =witching opportunity (to Apple), fueling an acceleration of Apple =martphone share gains. Google Trends data also corroborate iPhone =trength in China. AAPL remains our top pick entering 2018. Initial iPhone X China data show faster adoption vs. iPhone 8 =nd 8 Plus. Recall, three weeks ago we published a report on data that =e analyzed in conjunction with AlphaWise that aggregates smartphone =ata from a push-messaging service in China, highlighting Apple's =rowing share of active smartphones in China — which runs =ounter to the consensus view that Apple is losing share to cheaper =martphone brands in China (1). We now have data through November 19 =hat bolsters our bullish China thesis. This additional data show that =Phone X adoption in China is on a faster pace than the iPhone 8 or 8 =lus. As 2 depicts, iPhone X represented 0.36% of the iPhone installed =ase in China through November 19, higher than the initial adoption of =he iPhone 8 or 8 Plus. Importantly, the data through November 19 only =ontains 16 days of iPhone X availability, whereas the comparable period =or the iPhone 8 and 8 Plus includes a full 28 days. As a result, we =xpect further acceleration of iPhone X relative to iPhone 8/8 Plus in =he next data release.iPhone X data show runway for iPhone upgrades. =espite faster penetration of iPhone X vs. iPhone 8/8 Plus, we believe =here remains significant pent-up demand from the base of 2+ year old =Phone owners. This is because 48% of upgraders to iPhone X upgraded =rom the iPhone 7 and 7 Plus (3), meaning early adopters are driving =emand at the beginning of the cycle. Compare this to upgrader data for =he iPhone 8 and 8 Plus (4) that show 43% and 46% of upgraders, =espectively, in the November 19 period, came from the iPhone 6 and 6 =lus generation. As a result, we believe upgrades to the iPhone X from =he base of 2-year-old iPhone owners, which i This alert is sent from: Andrew Atlas, [email protected] You received this because you requested =hat you receive content and reports from: APPLE =NC. Please contact your FA if you want to unsubscribe from the =lerts. <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> Disclosures: Please see =he full report for risks, disclosures and other important =nformation. Important disclosures regarding the =elationship between the companies that are referenced in Morgan Stanley =esearch and Morgan Stanley Wealth Management research are available on =he Morgan Stanley Wealth Management disclosure website at https://www.morganstanley.com/online/researchdisclosures. 2 EFTA_R1_01794355 EFTA02604432 Morgan Stanley Wealth Management Not Acting as Municipal =dvisor Morgan Stanley Wealth Management is not acting as a municipal =dvisor to any municipal entity or obligated person within the meaning =f Section 158 of the Securities Exchange Act (the "Municipal Advisor =ule") and the opinions or views contained herein are not intended to =e, and do not constitute, advice within the meaning of the Municipal =dvisor Rule. Copyright The =opyright in materials provided by Morgan Stanley is owned by Morgan =tanley & Co. LLC. Morgan Stanley Wealth Management is the trade =ame of Morgan Stanley Smith Barney LLC, a registered broker-dealer in =he United States. © 2017 Morgan Stanley Smith Barney LLC. Member =lPC. <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> <http://www.morganstanley.com/img/cs/spacer.gif> 3 EFTA_R1_01794356 EFTA02604433