Disappointing China results mean that Apple needs big success with new iPhone

Source:Global Times Published: 2017/5/7 19:08:39

Apple's next iPhone will be key to its future in China. Sales in what was once the company's biggest growth market have now fallen for five straight quarters. Stiff competition with local handset makers and a weaker yuan have both hurt. While app-store sales are promising, a real turnaround hinges on the success of its much-anticipated, 10th-anniversary smartphone.

On Tuesday, the Californian giant reported another set of bleak results for Greater China. Revenue in the Chinese mainland, Hong Kong, Macao and Taiwan fell more than 14 percent year on year to $10.7 billion in the quarter ending April 1. That is a sharp reversal from two years ago, when regional sales were soaring on the back of the hugely popular iPhone 6.

Boss Tim Cook blames a mixture of factors, including a 5 percent currency devaluation, a tourism slump in Hong Kong, and weak sales of older iPhone models. The $772 billion colossus was counting on these slightly lower-end handsets to broaden its base of customers in up-and-coming bits of China, which is already the world's biggest smartphone market.

Instead, Apple shipments tumbled by almost a quarter last year as home-grown rivals such as Huawei and OPPO offered cheaper alternatives, IDC data shows. As a result, Apple's market share in China fell to less than 10 percent of handsets by volume in 2016, down from 13.6 percent the previous year - although it probably accounts for a much larger slice of the profit pool.

Apple remains optimistic. It points to double-digit percentage growth in sales of services, such as app store purchases. Apple gave no further details, but analysts at App Annie reckon Chinese iPhone users in total now spend more on games, programs and subscriptions than those in any other market.

The trouble is, iPhones still make up some 90 percent of Apple's revenue in China, according to analysts at Cowen and Co. Given the difficulties Apple faces expanding in the mid-market, wowing new users with its next flagship phone will be critical.

The author is Robyn Mak, a Reuters Breakingviews columnist. The article was first published on Reuters Breakingviews. bizopinion@globaltimes.com.cn



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