Apple’s double-digit growth in Greater China, which has helped fuel the huge success of the iPhone over the past few years, came to a grinding halt last quarter, with revenue falling 26 per cent as iPhone demand softened.
Sales in the Greater China region, which includes the mainland, Hong Kong and Taiwan, dropped to $12.5 billion in its fiscal Q2 ending 31 March. The region accounted for a quarter of Apple’s total revenue, down from 29 per cent a year ago.
Revenue in mainland China, Apple’s second largest market after the US, fell 11 per cent (7 per cent in constant currency terms) – a year ago sales surged by 81 per cent.
Apple yesterday reported its first-ever quarterly drop in iPhone sales, which dropped 16 per cent to 51.2 million units.
Apple CEO Tim Cook said in the earnings call he doesn’t think China is as weak as everyone says. “In China we may not have the wind at our backs that we once did, but it’s a lot more stable than what I think is the common view. So we remain really optimistic on China.”
He noted that it opened seven stores in China last quarter, taking its total to 35, and will open five more this quarter.
Cook talked up its services businesses, which expanded 20 per cent last quarter and represented the company’s second largest revenue-generating category in Q2. But with Apple suspending its iBooks and iTunes Movies services in China last week after the country’s video and publishing regulator imposed stricter guidelines on online content, its growth prospect in services could be severely dampened.
The company faced declining sales across the Asia-Pacific region, with revenue falling 25 per cent in Asia Pacific (ex China and Japan) to $3.16 billion.
Japan was the bright spot in the region, reporting a 25 per cent jump in sales to $4.13 billion.
Responding to a question about India, the third largest smartphone market in the world, Cook said infrastructure and sales channels will be key.
The LTE networks being rolled out in the country will “unleash the power and capability of the iPhone in a way that an older network, a 2.5G or even some 3G networks, would not”, he said.
He noted that unlike in the US, where operators sell the vast majority of phones, in India the operators in general sell virtually no phones. “So it’s through retail, and retail is many, many different small shops”.
The company has been working on its sales channels for the last 18 months, and Cook said he is encouraged by the results that it’s beginning to see.
“But because the smartphones that are working there are low end, primarily because of the network and the economics, the market potential has not been as great there. But I view India as where China was maybe seven to ten years ago, and I think there’s a really great opportunity there,” he said.