Ap­ple crum­bles as iPhone sales sag in China

China Daily (Canada) - - LIFE - By GAO YUAN gaoyuan@chi­nadaily.com.cn

Ap­ple Inc posted an­other record quar­terly rev­enue on Wed­nes­day, but the United States tech gi­ant seems to have lost the mo­men­tum in smart­phones, which gen­er­ates nearly 70 per­cent of its rev­enue.

A slower econ­omy and the al­ready-high hand­set pen­e­tra­tion rate in China may soon prompt Ap­ple to seek new growth driv­ers, in­dus­try sources said.

The Cu­per­tino, Cal­i­for­ni­abased com­pany said growth in iPhone sales reached the slow­est point since the late Ap­ple co-founder Steve Jobs launched the prod­uct line in 2007. Ap­ple shipped 74 mil­lion iPhones in the quar­ter ended in De­cem­ber 2015, an in­crease of 300,000 units year-on-year.

Tim Cook, chief ex­ec­u­tive of Ap­ple, also warned that iPhone sales could de­cline for the first time later this year.

Net in­come for the quar­ter was just 2 per­cent higher than the same pe­riod a year ago at $18.4 bil­lion, while the year-on-year rev­enue growth was more or less flat, Ap­ple said.

The com­pany’s growth in China also slowed amid a weak­en­ing econ­omy. Its rev­enue in the coun­try rose 14 per­cent dur­ing the three-month pe­riod com­pared with 20 per­cent a year ear­lier.

Dur­ing an earn­ings call, Cook ad­mit­ted the head­winds, but said China will con­tinue to be a key profit driver de­spite the slow­down. “We aren’t re­trench­ing. We don’t be­lieve in that. We are for­tu­nately strong enough to con­tinue in­vest­ing, and we think it is in Ap­ple’s long-term in­ter­est to do so,” Cook said.

The com­pany is ea­ger to open new bricks-and-mor­tar stores in small­erChi­nese cities to boost sales. Ap­ple plans to have 40 stores in China by the end of this year, com­pared with 26 stores now, most of which are in top-tier cities such as Bei­jing and Shang­hai.

CK Lu, prin­ci­pal an­a­lyst from con­sult­ing firm Gart­ner Inc, said Ap­ple needs to launch a “pow­er­ful enough” de­vice to win back buy­ers as sales of the lat­est flag­ship iPhone 6S/6S Plus failed to reach the lev­els of their pre­de­ces­sors.

“The ques­tion is if Ap­ple’s next-gen­er­a­tion hand­set will be equipped with fea­tures that could daz­zle con­sumers, like the iPhone 6 se­ries did in 2014 and 2015,” Lu said.

Af­ter nearly a decade of rapid growth, China’s smart­phone sales are now fu­eled by ex­ist­ing users who are look­ing to re­place their devices in­stead of first-time buy­ers. Ven­dors will need to in­tro­duce qual­ity devices at com­pet­i­tive prices to main­tain mar­ket share.

Kitty Fok, di­rec­tor of con­sul­tancy firm In­ter­na­tional Data Corp China, said Ap­ple does have a sta­ble re­place­ment mar­ket but it needs to lure more An­droid phone users to main­tain sales growth.

Fok said be­cause the rise of lo­cal ven­dors such as Huawei Tech­nolo­gies Co Ltd, the US com­pany’s new cus­tomer ex­pan­sion plan could be slower than ex­pected.

Ap­ple has to be pre­pared for com­pe­ti­tion from Huawei, Xiaomi Corp and some other lo­cal play­er­swhoare tar­get­ing the pre­mium mar­ket.

Mar­ket shares of Chi­nese smart­phone brands are ap­proach­ing 80 per­cent in the coun­try, data from govern­ment think tank the China Academy of Telecom­mu­ni­ca­tion Re­search showed.

Frank Meng, chair­man of Qual­comm China, the big­gest provider of smart­phone chipsets, said Chi­nese ven­dors are shift­ing fo­cus to the high-end mar­ket for big­ger mar­gins.

“Some of the com­pa­nies are al­ready plan­ning over­seas ex­pan­sions (in high-end sec­tor), it will be a trend in the fu­ture,” Meng said.

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