Apple defies expectations with strong Q2 China growth

World
Europe

Apple released its latest quarterly figures on Tuesday, with strong China growth surprising many analysts who had anticipated a slump in sales following a decrease in its regional market share.

Greater China revenue of 13 billion US dollars marked a year-on-year increase of 21 percent, with the tech giant achieving its strongest growth in the region in two and a half years.

According to Apple CEO Tim Cook, this was the tech giant's best-ever second quarter. The company’s latest flagship iPhone X smartphone was the biggest selling mobile device in the region in the last quarter, despite initial misgivings in the industry over how many customers would be put off by its 1,000 US dollar price tag.

Apple's range of wearable technology posted growth of 50 percent, according to Tim Cook. /VCG Photo

Overall, Apple posted a 16 percent increase in global revenue of 61.1 billion US dollars, with net income of 13.8 billion US dollars (up 25 percent) in its latest fiscal quarter, numbers which came ahead of market expectations. However, worldwide iPhone sales fell slightly short of estimates, with 52.2 million units sold.

While Cook didn’t reveal the number of smartphones Apple had sold in China in the most recent quarter, he suggested that a significant proportion of the strong revenue growth was also down to Apple’s services in the region, such as iOS App Store and iCloud.

In an interview with CNBC, Cook pointed to global services growth of 31 percent (9.19 billion US dollars), before adding that in China “services was very powerful.”

The latest figures were released days after analysts from a range of firms including Morgan Stanley and UBS predicted continued weakness in China for Apple.

Market analysis firm Canalys even demoted Apple to its “Others” category in a report released April 27 on the Chinese market’s biggest smartphone brands, saying Apple’s smartphone shipments in China had slumped 21 percent in the first quarter.

Apple CEO Tim Cook speaks at Lane Tech College Prep High School in Chicago, Illinois, March 2018. /VCG Photo‍

Morgan Stanley told Business Insider on Monday that it saw “continued weakness” in Apple’s China sales, predicting its market share had slumped from 40 percent in 2015 to just 18 percent. Earlier in April, UBS told investors it doubted China would ever return to its 2015 peak, thanks to market saturation and the rise of domestic smartphone brands.

Apple’s latest revenue figures are also surprising given that the overall China market for smartphones slumped by 27 percent in the first quarter.

That came after an 11.6 percent downturn in shipments in 2017, according to the China Academy of Communications and Information Technology (CACIT) – a body directly under the Ministry of Industry and Information Technology.