“As all Apple investors know, China is a very important market for the company. Apple generated $18.4 billion in revenue in Greater China, 24% of its total revenue (27% of its operating income) and an increase of 14% year over year,” Chuck Jones writes for Seeking Alpha. “Without China’s revenue, the rest of the company would have reported a 1.6% decrease year over year versus a 1.7% increase.”
“It is too bad that Apple didn’t introduce a larger screen iPhone earlier,” Jones writes. “The larger screen iPhone 6 kicked off tremendous growth in China starting in the December 2014 quarter. Each quarter in fiscal 2015, Apple’s China business saw at least a 70% increase in revenue year over year culminating with a 112% increase in the June 2015 quarter. For fiscal 2015, China’s revenue grew 84% to $58.7 billion and was 25% of Apple’s total revenue. When you remove China’s revenue from Apple’s total revenue, the Rest of the World’s (ROW) revenue increased 16% (about 22% in constant currency).”
“While Apple’s Chinese revenue growth has slowed down from its year-over-year growth of 70% or higher each quarter in fiscal 2015 to 14% in the December quarter (17% in constant currency), it is still a major growth driver. It has also generated the majority of AAPL’s operating income for each of the past four quarters,” Jones writes. “While there is always the risk that Apple’s China business could succumb to Android smartphones from the Kantar and Strategy Analytics data, it looks like the company is on solid footing in China. Additionally, AAPL is expanding its retail store count from 28 to 40 by the summer of 2017 which will also help bolster its position along with more Chinese entering the middle class.”
Read more in the full article here.
MacDailyNews Take: Hence the reason why Cook has been and remains so focused on China.
SEE ALSO:
Apple Pay to take on Tencent’s WeChat Wallet and Alipay in China – December 18, 2015
Half of iPhone 6/Plus buyers in China were first-time buyers last quarter – December 14, 2015
This may be bigger to Apple than new iPhones: Apple revenue in China has risen by 112 percent in the past year – October 27, 2015
If the telcos there follow the telcos lead in the US, Apple is done. No subsidy equals fewer sells.
Why do you bother troll, your rants are totally stupid.
No, it’s just a grown up look at what’s going on.
If the US market is soft, and the telcos have started requiring full payment for the phone, no subsidies, is it hard to reason what happens elsewhere. Now knowing that the iPhone is apple’s cash cow, what happens is sales fall off in China.
silverhawk1 i know you are not that bright, but maybe you should learn how to play checkers, the move are not as complicated, cause life seems to be to hard for you.
You have to forgive silverhawk. She is easily frightened by words she finds disturbing. She tends to lash out in fear and confusion when her little world is shaken. It’s probably due to some childhood trauma.
Sprint, Verizon and AT&T are not requiring full payment for the iPhone up-front. They’re offering monthly payment plans similar to what Apple is doing itself. So instead of paying a $300 subsidized price for the phone with a 2-year contract at time of purchase, you now pay $30 at time of purchase, and have to pay off the rest monthly, with the option to upgrade to the latest version when its released which is designed to keep you on the monthly payment treadmill forever.
That statement is simply ridiculous.
T-Mobile has eliminated annual contracts some three years ago. You had to pay full price upfront, or you could get zero-percent financing (an interest-free 24-installment loan) through T-Mobile’s financing service. Over those years, T-Mobile seems to have grown their market share quite noticeably (compared to other big carriers some of which had hemorrhaged customers).
There has been no effective change in the USA with respect to the perceived acquisition price for a smartphone. If nothing, the perception now, with two-year contracts and “subsidy” pricing gone, it has become even less expensive to get an iPhone (or another expensive phone): most carriers now ask for $0 down-payment for that 24-installment loan. All you pay upfront is retail tax, which is always less than $100.
So, no, the move from ‘subsidy’ contract to no-contract will NOT, by it self, cause a drop in sales; in fact, if T-Mobile is any indicator, it will improve sales. The upfront payment is now even lower (it was $200 for a subsidy model, and now it is around $50 — the retail tax on $650 iPhone), and once the phone is paid off, the monthly payment suddenly drops. Not to mention that the subsidy model ended up being taxed at least $50 more over the course of the contract (you were paying wireless service tax, which is close to 20% on the whole monthly payment to your carrier, even though part of it was an installment for your phone, which should be taxed as retail tax of less than 10%).
China sales will heavily depend on the strength (or weakness) of the US dollar (vs. renminbi), and the strength of the Chinese economy (obviously); subsidy or non-subsidy sales will have nothing to do with it.
That’s still speculation given that the telcos only recently started removing subsidies so it’s too early to tell if iPhone sales declines are directly related to that.
Apple sold nearly 75 million iPhones last quarter. Don’t think they have anything to worry about.
It’s extremely difficult to sell 75 million of anything, yet Apple did it! I’m impressed, even if stock traders and analysts pretend not to be. I won’t be signing up for the Doom Watch anytime soon. I don’t want to be seen with those clowns, let alone date one of them.
Subsidy model was always more expensive, both up-front, as well as over the two years, than a subsidy-free, contract-free model. Moving away from subsidy will actually have a positive effect on sales numbers. Let me explain.
Under subsidy model, you paid a $200 up-front price, and then you had your monthly wireless rate, but you were required to be on a two-year contract; leaving early would incur Early Termination Fee. Under contract-free model, you buy your phone in full, by paying $0 as an up-front down-payment, then around $50 retail tax on your $650, and then paying 24 monthly installments of around $24 each for your phone. Compared to the prior ‘subsidy’ model, your upfront payment is lower (practically just the tax, $50, vs. $200), and your monthly payment is the same or slightly higher (basic mobile rate, plus the loan installment).
There are two main advantages to the contract-free model:
1. When your phone is paid off, your monthly rate goes down;
2. The total amount of money is lower, because of the lower tax. Under the subsidy model, your monthly rate is taxed as “Wireless Service”, and that rate can get above 20% in some states. However, part of your monthly payment (around $20) is the ‘subsidy’ for your phone. So, over the life of your contract, some $450 is taxed at 20%, instead of 8% (or whatever normal retail tax is in your state). To make things worse, when your contract is over and you don’t immediately upgrade, you are now donating money both to your carrier, as well as to the government; even though the phone has been paid off, you’re still paying the full monthly rate, $20 is a donation to Verizon/AT&T/Sprint, plus another $4 (tax) for the US government. Every month.
No-contract model is cheaper and much more attractive to consumers than the old two-year subsidy model.
What sales decline?? Apple sold record number of iPhones in the last quarter. There is no decline. If we were to really get hell-bent on painting a negative picture about the iPhone, we could say that the rate of growth of iPhone sales has slowed; instead of growing 30% year-over-year, it has grown much slower, so it is all doom and gloom (even though Apple sold more iPhones in the last quarter than in any quarter before, and far more than any other maker).
For this upcoming March quarter, Tim Cook said that iPhone sales are projected to decline compared to March quarter a year. This will be the first ever YoY decline for the iPhone. My reply to BOB was that there’s no evidence to directly link this decline to telcos removing subsidies.
The US is really the only market that ever subsidized phones in a large way. Every other market has always made you buy the phone. In those markets, however, mobile service is much cheaper than the US. Even with the new non-subsidized plans and lowering service charges, US carriers still charge a lot more than European or Asian carriers.
Subsidised contracts have been the norm in the UK for many years, but there is a growing trend away from them, largely due to some very competitive SIM only deals from most carriers.
People have learned that if you buy an unlocked phone either outright, or on a 24 month hire purchase agreement and then arrange the airtime contract separately, it’s not only cheaper per month, but you can trade in unlocked iPhones for more money than locked phones and you have the freedom to change your service provider immediately.
We often travel abroad and buy a local SIM card to use in our unlocked phones. The calls and data cost a fraction of what
we would have paid via data roaming.
When I moved to my present house, my previous service provider didn’t have a useable signal here, so my phone was of no use. It was a trivial matter to get a SIM for another company and simply stop paying the original one. My wife was on a 24 month contract and her service provider wouldn’t let het terminate her contract early, even though she could no longer use her phone at home. Fortunately there were only a few months left and she now has an unlocked iPhone and a SIM only contract with a supplier that has a decent signal here.
Hey, BOB, you spelled your name backwards.
It wasn’t just the iPhone 6 Plus but the growth in China of LTE and the middle class that caused Apple to do well. Maybe other factors as well.
Ain’t nothing like the real thing
Silverhawk, have you considered counseling or other professional help? Your bizarre and angry outbursts demonstrate a severe lack of emotional control and maturity. Obviously, there is little anyone else can do to improve your intellectual abilities, but maybe someone could assist you in developing some coping skills.
Cisco, you might be overreacting to someone who simply speaks his mind. Does anyone deserve to be silenced, based on a psychiatric diagnosis via the Internet?
I never stated that silverhawk be banned. You suggesting this is both ignorant and false. I only suggested that silverhawk’s behavior is completely unbecoming and that she needs help to overcome her antisocial behavior.
Silverhawk can post whatever unintelligible, confused, bitter, insulting, and demeaning post she wants. I only hope that this sad and pathetic member of the human race similarly respects other people with views, beliefs, ideas, and philosophies that run counter to hers.
I see constant “fire Cook” rants on here. Now I read this snippet that suggests that Cook’s actions in China are the tenuous support keeping Apple stock afloat. If true, I can only wonder if Jobs would have been so successful in the China venture. My guess is probably not.
People love to idolize Jobs and vilify Cook. I remember lots of mistakes Jobs made (and some quite recently). One example would be dragging his feet on a 5.5″ model phone. Not that it’s the best size, but that it allowed Samsung to find a niche.
It’s also worth remembering that Cook has spent many years doing the groundwork for Apple’s involvement in China. He had the vision to see where the growth potential was going to be and then to prepare the way for Apple to take advantage of the opportunity.
Another less obvious advantage with dealing with China is that while in the west there is a surge in demand prior to Christmas, the equivalent surge in the Chinese market happens about now, for the Chinese New Year. Having two markets with different peaks in demand helps with trying to keep control of the manufacturing and distribution processes.
China is not the sort of place where you can just breeze in and set up a shop to sell your products. China does things in it’s own way and at it’s own speed. If you don’t respect the Chinese way of doing things, you’ll never have any success there.
Apple cannot afford to put all its eggs in the Chinese basket.