Apple’s Big Growth Driver: China

Westlake Apple Store, Hangzhou, China

Daisuke Wakabayashi reports: The biggest growth driver at Apple is not any single product. It’s China. 

The numbers are shocking. Apple’s revenue in greater China – defined by the company as China plus Hong Kong and Taiwan – rose 112% in the fiscal third quarter ended June. This means that growth is accelerating in China after a 71% increase in the previous quarter, which was considered something of a seasonally-inflated surge because it encompassed the Chinese Lunar New Year, a peak shopping period in the country.

“The macro picture looks fantastic. Maybe there are minor thunderstorms now and then, but that kind of goes with the territory. We’re just getting started there.”

— Apple Chief Executive Tim Cook

Apple Chief Executive Tim Cook said he expects China to become the company’s biggest market at some point in the future. It appears that future is fast approaching. (Apple’s biggest market now is the Americas where revenue was $20.2 billion compared to $13.2 billion for Greater China, but revenue in the company’s home market grew a more pedestrian 15%.)

apple-tim-cook-china-mobile

“China is a fantastic geography with an incredible unprecedented level of opportunity there. And we’re going to be there.”

— Cook, in a conference call with analysts

A growing reliance on the Chinese market does expose Apple to concerns about China’s economy, exacerbated by the recent pullback in the Shanghai stock market. On Wednesday, Cowen & Co. analyst Timothy Acuri downgraded Apple’s stock to a “market perform” in part because he said he saw lower-than-expected iPhone sales as a cause for concern due to mounting evidence of “a widespread demand reset from China.”

Cook said the company’s bullish view about China’s future remains unchanged. He said it is still planning to increase the number of Apple stores in China to 40 by mid-2016 from 22 currently.

“The macro picture looks fantastic,” said Cook in an interview with the Wall Street Journal on Tuesday. “Maybe there are minor thunderstorms now and then, but that kind of goes with the territory. We’re just getting started there.”

Cook rattled off the data points….(read more)

WSJ

–Daisuke Wakabayashi. Follow him on Twitter @daiwaka.

 



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