China Sales Slide Eats Into Apple Revenue
April 27 2016 - 3:49AM
Dow Jones News
By Eva Dou
BEIJING--The once-hot China market accounted for a large chunk
of Apple Inc.'s first quarterly revenue decline in 13 years,
highlighting the impact of the saturated Chinese smartphone market
on global gadget makers.
Apple posted a 13% drop in revenue Tuesday, with falling sales
in Greater China, which includes Hong Kong and Taiwan, responsible
for 58% of that decline. The iPhone maker's global revenue fell
$7.5 billion to $50.55 billion in the quarter ended March 26,
compared with a year earlier. During the period, revenue from
Greater China fell $4.3 billion to $12.49 billion, compared with
71% growth a year ago.
"The China market is really seeing flat growth," said Kitty Fok,
China managing director for research firm International Data
Corp.
Apple Chief Executive Tim Cook said on an investor call Tuesday
that the China market was stronger than people thought. He said the
majority of the weakness came from Hong Kong due to its currency
appreciation.
Analysts said Hong Kong's retail weakness is a part of the
overall slowdown in mainland China, since many of the city's
shoppers are Chinese tourists. Hong Kong's iPhone sales have also
slowed with the opening of more retail channels in mainland China,
as more shoppers buy iPhones directly instead of purchasing them in
Hong Kong or going through "gray market" agents who do so, the
analysts said.
For years, double-digit growth in China's smartphone market
padded the sales for major brands such as Apple, as they picked up
millions of first-time phone buyers each quarter. China's
smartphone market finally reached saturation last year, adding
growth of only 2.5%, according to IDC, which estimates that growth
will slow further to 2% this year.
For Apple, China's market slowdown was compounded by its iPhone
cycle. The company releases a major new iPhone model every two
years, with the next big upgrade expected this year. Some buyers
are likely to hold out for the new iPhone 7 instead of getting an
iPhone 6S now, said Nicole Peng, China research director at
Canalys.
"The 6S was not a big upgrade to the 6," she said. "In the first
quarter of 2015, Apple was the number one vendor in China thanks to
the 6, but the 6S isn't able to help Apple achieve such
success."
Analysts expect the launch of the iPhone 7 to return Apple to
growth. CK Lu, a research analyst at Gartner Inc., said the average
price for iPhones is expected to fall in China, with Apple having
to offer lower cost models in the maturing, competitive market.
That will put pressure on revenue growth even if unit sales remain
constant, he said.
"We believe Apple still has its brand premium in China," he
said. "But its sales mix is moving to lower average selling
price."
Write to Eva Dou at eva.dou@wsj.com
(END) Dow Jones Newswires
April 27, 2016 03:34 ET (07:34 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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