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Apple chief executive Tim Cook speaks on stage during the new iPhone 11 launch at the company’s headquarters in Cupertino, California, on September 10. Photo: Agence France-Presse

Tim Cook says easing of trade tensions, price cuts helped Apple stabilise business in China

  • Apple’s total quarterly sales on the mainland, Hong Kong and Taiwan declined 2.4 per cent to US$11.13 billion
Apple

Apple chief executive Tim Cook said the iPhone maker has “turned things around” in China, following the company’s decision earlier this year to cut product prices there and the recent easing of trade tensions.

“I think the trade tension is less and that clearly looks positive right now with the comments that we’ve been reading in the press,” said Cook in a conference call with analysts after Apple posted its financial results for the quarter ended September 28.

Cupertino, California-based Apple reported a 2.4 per cent decline in quarterly sales to US$11.13 billion in its Greater China market – comprising the mainland, Hong Kong and Taiwan – from US$11.41 billion in the same period last year. That compared favourably against a 27 per cent sales decline in that market during Apple’s December quarter.

“As you can tell from the numbers, we’ve significantly improved since the beginning of the year,” Cook said. “And if you looked at that in constant currency, we actually grew. And so there is a very slight growth there. We obviously want that to be better. But we feel good about how we’re doing.”

Apple's new iPhone 11 handsets are displayed at the Apple Store in Hong Kong’s IFC Mall. Chief executive Tim Cook said Apple’s services and wearables businesses have been growing in its Greater China market, comprising the mainland, Hong Kong and Taiwan. Photo: Reuters
Apple’s latest quarterly results in Greater China comes as a bright spot for the company, whose iPhone has been losing share in the world’s largest smartphone market. Nationalist rhetoric on the mainland has prompted more consumers to switch to smartphones made by Chinese brands, led by Huawei Technologies, amid the protracted trade dispute between Beijing and Washington.

The US technology giant has also been mired in controversy in Hong Kong over its recent decision to remove the HKmap.live app from its online App Store, as anti-government protests continued in the city.

In a leaked memo to Apple staff, Cook defended the removal of the HKmap.live app, which crowdsources police locations around Hong Kong, saying it was being used “maliciously” to target police officers and commit vandalism. That decision, he said, was based on credible information from the Hong Kong Cybersecurity and Technology Crime Bureau, as well as from users in the city.

The app’s removal led to accusations that Apple was bowing to demands by the Chinese government to protect its business interests on the mainland.

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At the conference call, Cook did not directly respond to a question about Hong Kong. Shannon Cross, principal analyst at Cross Research, asked for Cook’s thoughts on “Hong Kong [which] used to be a big market [for Apple]”, adding that there was “obviously some turmoil there”.

Apart from the easing of US-China tensions because of the progress in trade negotiations, Apple stressed during the call the positive reception for its products and pricing strategy in the world’s second largest economy.

“It’s not all about iPhone in China,” said Cook, who described Apple’s services business as growing double digit. “We began to see more gaming approvals in the quarter, or I should say some key gaming approvals,” he said. Chinese-developed mobile games are a big portion of the company’s App Store business.

“Also wearables,” Cook said, referring to the Apple Watch and AirPods. “Wearables are doing so great at a company level. They’re doing even better in China. And so lots of positives there.”

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In April, Apple cut prices on several of its products in its online store on the mainland. The move was made at the same time the Chinese government lowered the value-added tax for manufacturers to 13 per cent from 16 per cent.

In the same conference call, Apple chief financial officer Luca Maestri said the company’s strategy in emerging markets was to pick “locally relevant prices” when the US dollar had become stronger. “We tried to stay as close as we could to a local price point that we knew was effective for that particular market,” Maestri said.

Those moves augured well for Apple as US and Chinese negotiators made progress last month on a deal to resolve the two countries’ trade dispute.

“I have long thought that it was in both countries’ best interests to get to an agreement that, maybe initially, doesn’t solve everything, but solves some things that each party may want and get to a better place than where we’re at,” Cook said. “I’m hopeful that that’s where we’re headed.”

For more insights into China tech, sign up for our tech newsletters, subscribe to our Inside China Tech podcast, and download the comprehensive 2019 China Internet Report. Also roam China Tech City, an award-winning interactive digital map at our sister site Abacus.

This article appeared in the South China Morning Post print edition as: Apple CEO paints upbeat picture of mainland business
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