Apple CEO Tim Cook confident in China over long term despite second quarter sales drop
Apple's China sales fell in the June quarter, and although chief executive Tim Cook was optimistic about prospects over the long term, mainland Chinese sales will not get a boost from Apple Intelligence, which is not being rolled out to local users yet.
The California-based tech giant's revenue in the Greater China region, which includes Hong Kong and Taiwan, was US$14.73 billion in the June quarter, a 6.5 per cent decline compared with the same period last year.
However, the company noted that over half the drop was due to foreign exchange fluctuations, and that the market declined less than 3 per cent on a constant currency basis. Sales for the Greater China region missed the average estimate of US$15.26 billion by analysts polled by Bloomberg.
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People walk past an Apple store in Shanghai, China September 13, 2023. Photo: Reuters alt=People walk past an Apple store in Shanghai, China September 13, 2023. Photo: Reuters>
Greater China, Apple's third-largest market, was the only declining segment for Apple. The company's total revenue reached US$85.8 billion in the quarter, beating analyst estimates.
Cook expressed optimism on the China market, which he described as "the most competitive in the world", adding that he has seen improvements in the business environment in the first half of 2024.
"We continue to be confident in the long-term opportunity in China," Cook said in a conference call with analysts on Thursday. "I don't know how every chapter of the book reads, but we're very confident in the long-term."
Cook added that the mainland China market set a June quarter record for iPhone upgrades. "That's a very strong signal," Cook said on the call.
The weakening China sales came after Apple conducted rounds of rare and steep discounts during the quarter, which saw the iPhone fall out of the top 5 ranking of smartphone vendors in the world's biggest handset market.
"iPhone demand continues to slowly turn the corner in China ... we expect positive growth in the September quarter," Daniel Ives, managing director of Wedbush Securities, wrote in a research note on Thursday, adding that Apple has moved past its worst period in the China market.
Canalys data showed that iPhone shipments in China in the three months ended June declined 2 per cent year on year, bumping Apple down to No 6 on the list of top vendors by shipments. It marked the first time in years that the iPhone maker has been out of the top 5 in one of its most important markets.
A women uses a phone as she passes a lighted Apple logo at the Apple store at Grand Central Terminal in New York City, April 14, 2023. Photo: Reuters alt=A women uses a phone as she passes a lighted Apple logo at the Apple store at Grand Central Terminal in New York City, April 14, 2023. Photo: Reuters>
While Apple is betting on its artificial intelligence (AI) features to drive the next round of growth, uncertainties are looming around how and when the company can bring Apple Intelligence to regions including China and the European Union (EU) due to their stringent regulatory frameworks.
Cook told analysts at the conference that Apple is "very constructively engaged" with the regulatory bodies of China and EU, and is aiming to bring the AI features to all users.
"We have to understand the regulatory requirements before we can commit to doing that and commit a schedule to doing that," Cook said.
The debut of Apple Intelligence's beta version on its newly released iOS 18.1 excluded China, casting a shadow over the company's prospects in the market where it is already losing ground.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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