Apple Inc’s disappointing holiday-quarter outlook has cast a spotlight on its mounting problems in China, where the iPhone maker is struggling with the unexpected rise of Huawei Technologies Co (華為) and an increasingly hostile business environment.
Apple, which is trying to reverse several successive quarters of revenue decline, on Thursday reported its lowest revenue from the Greater China region since the middle of last year.
Revenue fell to US$89.5 billion in the fiscal fourth quarter, which ended on Sept. 30. That compared to an average Wall Street estimate of US$89.4 billion. Apple’s shares slid more than 3 percent after that number missed the average of five analysts’ projections by 11 percent.
Photo: AFP
Apple CEO Tim Cook assured Wall Street that iPhone demand remains strong in China, blaming Mac and iPad weakness instead.
However, he also predicted flat December-quarter revenue, dampening analysts’ expectations of a growth rebound.
“The challenges that Apple faces in China are unprecedented,” International Data Corp analyst Will Wong said. “It not only needs to deal with the political tensions and Huawei’s competition, but also a different consumer sentiment that is more rational and cautious in spending.”
Apple’s revenue in Greater China declined 2 percent — a steeper drop than the companywide figure. There are signs that the trend might persist: Initial sales of the iPhone 15 in China were 6 percent lower than its predecessor in part because of incursions by Huawei, the consultancy GfK said.
Aside from stronger competition, Apple faces growing risk from political tensions between Washington and Beijing.
Beijing has expanded a ban on Apple products to state-backed firms and government-backed agencies. Hon Hai Precision Industry Co (鴻海精密) — which assembles the majority of Apple’s iPhones from its Chinese factories — is now under investigation over taxes and land use.
Shares of Hon Hai, also known as Foxconn Technology Group (富士康科技集團), and fellow iPhone assembler Pegatron Corp (和碩) fell 1.24 percent and 0.65 percent respectively yesterday.
Still, the iPhone continues to make inroads in the world’s biggest smartphone market, Cook said.
Various models accounted for the four top-selling phones in urban China, he said.
“China is an incredibly important market,” he said during a post-earnings conference call with analysts. “And I’m very optimistic about it.”
He did not face any direct questions about the situation.
If the overall Chinese smartphone market is contracting — as analysts have said — Apple’s results suggest that it is winning market share, Cook said.
He also touted that the company is opening a new store in the country this week. It is coming to Wenzhou in eastern Zhejiang Province and will be the company’s 46th in the region.
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