Earnings reports


Apple posts fifth quarter of sales drop in greater China, hurt by Huawei, Oppo and Vivo

iPhone maker’s combined revenue in Hong Kong, Taiwan and mainland fell 14 per cent in the March quarter to US$10.7 billion

PUBLISHED : Thursday, 04 May, 2017, 8:03am
UPDATED : Thursday, 04 May, 2017, 9:04am

Apple reported its fifth consecutive quarter of revenue decline for its greater China business, buffeted by the strong US dollar and intense competition from Chinese smartphone brands led by Huawei Technologies, Oppo and Vivo.

The world’s most valuable company reported a 14 per cent decrease in combined first-quarter revenue from mainland China, Hong Kong and Taiwan to US$10.7 billion, compared with US$12.5 billion a year ago.

“Our March quarter results were in line with our expectations, and similar to the year-over-year performance we experienced in the December quarter,” Apple chief executive Tim Cook told analysts in a conference call. “We continue to be very enthusiastic about our opportunity in China.”

He also indicated that Apple’s Mac computers and services, which include digital content, iCloud and AppleCare warranties, saw “strong double-digit revenue growth” in greater China. In addition, Cook said total store revenue on the mainland was up 27 per cent year on year for the quarter.

The greater China market accounted for roughly a fifth of the US$52.9 billion total revenue of Apple in its fiscal second quarter ended April 1, behind the Americas and Europe. Sales of iPhones made up about 63 per cent of that global turnover.

“While competition was tougher [last quarter] with companies like Huawei, Oppo and Vivo in the highly competitive Chinese market, Apple maintained a good dynamic throughout the quarter,” said Thomas Husson, a vice-president at Forrester Research.

Cook pointed out that Apple’s financial results on the mainland over the October to March period were “much better” than in the same six-month period in the previous fiscal year on the back of solid iPhone 7 Plus sales.

“We sold the highest number of Plus models in the first half than ever before [on the mainland], compared to 6s Plus or the 6 Plus,” he said, without providing figures.

He added, however, that “[Apple’s] performance continued to be weak in Hong Kong, which has been hit a bit harder as the tourism market continues to slump”.

Total first-quarter smartphone sales in greater China were estimated at 11 million units, down from 13.3 million a year ago, according to Neil Shah, a partner at Counterpoint Research.

Data from Counterpoint showed that Apple shipped 50.8 million iPhones worldwide in the first quarter, against 82.8 million Android smartphones from Huawei Technologies, Oppo and Vivo in the same period.

“I won’t be surprised to see a big rebound for Apple in China after the iPhone 8 launches [in the second half of this year],” said Bryan Ma, vice-president for devices research at IDC. “We’re seeing a lot of pent-up demand there, and the Apple brand hasn’t lost its lustre, despite how gloomy the earnings for Apple China might look today.”

In Beijing, third-party Apple retailers said many potential buyers are holding on to their old iPhones in anticipation of the much-speculated new iPhone 8 in the second half of this year.

“Most of those who buy the iPhone 7 or iPhone 7 Plus these days are in urgent demand for a replacement, either because their old phones are too slow to use or the screens have been smashed,” said a salesman at iSpace, an authorised Apple retailer, without providing sales data.

Xiao Xiangyi, a Beijing office worker and long-time iPhone user, said she may turn her back on Apple if the highly anticipated iPhone 8 fails to impress her.

“People around me have been saying so many nice things about Huawei. But the next Apple smartphone sounds like a really big deal, being the 10th anniversary version of the iPhone. So I will wait till I see iPhone 8 to make my final decision,” said the 30-year-old Xiao, who currently uses a 6S model, her third iPhone since 2010.

The iPhone first entered the greater China market in July 2008, when Hutchison Telecommunications Hong Kong made the iPhone 3G available in the city. China Unicom introduced the iPhone on the mainland in October 2009. It was followed by China Telecom in March 2012 and China Mobile in January 2014.