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Apple's cheaper iPhone 11 expected to spur upgrades in China

Analysts are optimistic about demand for Apple Inc.'s low-cost iPhone 11 model, noting that China, in particular, represents a key growth opportunity for the device.

Apple recently unveiled the iPhone 11, iPhone 11 Pro and iPhone 11 Pro Max models, powered by a new, faster A13 bionic chip and come equipped with a completely redesigned camera system. The iPhone 11 starts at $699, while the iPhone 11 Pro and iPhone 11 Pro Max retail for $999 and $1,099, respectively. The iPhone 11 lineup is available for preorder now and will hit stores Sept. 20.

Wedbush Securities technology analyst Daniel Ives said preorder demand for the new iPhones looks "good out of the gates," noting that the lower-priced iPhone 11 model, in particular, should serve as a "catalyst" for consumers who did not upgrade last year.

The company remains "laser-focused" on China for the cheaper iPhone 11 model, added Ives in a Sept. 15 research note, and said Apple must encourage upgrades from roughly half of the current 60 million to 70 million iPhone users in that region for this year's product launch to be "successful."

"Apple has a golden opportunity over the next 6 to 12 months to put an iron fence around its customer base and catalyze upgrades with the iPhone 11," Ives wrote.

Greater China remains Apple's third-largest market for net sales, behind the Americas and Europe. Even though trade tensions have weighed on the company's sales in the region during recent quarters, those numbers appear to be improving.

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Apple during the June quarter reported quarterly sales in China of $9.16 billion, down 10.4% sequentially from the March quarter. While the double-digit drop was significant, it was much smaller than the 26.7% drop the company saw in the region between the March and June quarters in 2018.

The pricing of the $699 iPhone 11 is "fairly attractive," and could spur demand on the low end, Evercore ISI IT hardware analyst Amit Daryanani said in a Sept. 13 research report.

The analyst, who raised his EPS estimates for Apple's September quarter by 5 cents, said Apple's latest iPhone launch could drive upside for the company.

"We think there is inherent upside to September-quarter EPS given Apple isn't staggering their launches but announcing all the three products simultaneously," Daryanani wrote.