Apple ‘pleased’ with China sales, which beat expectations in the March quarter, as it eyes India expansion

Apple sales fell 2.9 per cent in Greater China and 2.5 per cent globally, but it beat expectations owing to strong sales of services and iPhones
The company has been looking to diversify its supply chain away from China, as sales across the rest of Asia jumped more than 15 per cent, doubling in India

Apple

Dylan Butts

Published: 8:00pm, 5 May 2023

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Apple’s sales in Greater China slid 2.9 per cent in the March quarter amid slow economic growth in the market, while global results beat expectations as the company looks to diversify its supply chain with an eye towards India.

The world’s largest company by market capitalisation saw global revenue decline 2.5 per cent to US$94.8 billion in the first three months of the year, beating expectations by about US$2 billion. It was the second consecutive quarterly sales decline for the company.

In Greater China, which includes Hong Kong, Macau and Taiwan, Apple generated US$17.8 billion in sales. In the Americas, revenue fell 7.6 per cent to US$37.8 billion.

Next iPhone will still be made in China, but Apple is spreading the workload

Apple’s US$24.2 billion in global profit for the quarter, while down 3.4 per cent year on year, also surpassed expectations by about US$1.5 billion owing to record revenue from services and strong iPhone sales.

“We were particularly pleased with the performance we saw in emerging markets,” Apple CEO Tim Cook said during an earnings call, adding that the company achieved several records for the quarter in countries including India, where revenue doubled year on year.

India, which this year surpassed China to become the most populous country in the world, is now a major focus for Apple. Cook visited India last month for the opening of Apple’s first two retail outlets in the country as the company seeks to capitalise on rising incomes and consumer spending, while smartphone sales struggle globally.

“What you see there is a lot of people entering the middle class, and I’m hopeful that we can convince some of them to buy an iPhone,” Cook said in the call. “Right now, that’s working out well.”

The emphasis on India follows efforts from Apple to diversify some of its manufacturing away from China, with a particular focus on expanding capacity in India. Shipments of iPhones made in India grew 65 per cent year on year in 2022, according to Counterpoint.

Apple CEO Tim Cook gestures during the inauguration of India’s first Apple retail store in Mumbai, India, on April 18, 2023. Photo: Reuters

Cook reiterated in the earnings call that Apple is looking for ways to optimise its supply chain and invest in other markets.

China produced up to 85 per cent of iPhones last year, but the company has faced three years of supply chain difficulties there amid Beijing’s stringent Covid-19 controls and turmoil in the semiconductor supply chain exacerbated by the US-China tech war.

Last November, pandemic restrictions contributed to a worker exodus at the world’s largest iPhone plant in Zengzhou, operated by Foxconn Technology, Apple’s largest manufacturer. The worker shortage led to delays in iPhone 14 shipments for the holiday season.

Foxconn is now planning a new US$700 million plant in India to boost local production, leading to speculation that China is at risk of losing its dominant role in Apple’s supply chain.

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Apple opens its first retail store in India

Expectations were high for a rebound in consumer spending in China after it recently ended Covid-era policies. But the recovery has been muted, with factory activity falling in April.

Still, Cook said the company is “pleased” with its results in China and the “acceleration” it experienced with the reopening. Sales from services also reached a record in Greater China, aided by first-time buyers of Apple products, according to the company.

Outside of China, Asia-Pacific sales jumped 15.3 per cent year on year to US$8.1 billion. Apple’s shares rose more than 2 per cent in extended trading on Thursday in the US.