Apple's Q3 2016 Revenue Drops 33% in Greater China as Europe Regains Position as Second Biggest Market

[MacRumors]

In today's third quarter earnings report, Apple revealed a significant drop in revenue from Greater China, which is down 33 percent year over year. Revenue from China was at $8.9 billion in Q3 2016, down from $13 billion in Q3 2015.

During the followup earnings call, Apple CEO Tim Cook said the company continues to be encouraged about growth in the country despite the decline in revenue and remains "very optimistic about growth opportunities."

He said Apple's underlying business is stronger in China than the results imply, with the iPhone install base in the country up 34 percent year over year. Cook cited statistics from China Mobile, one of the largest carriers in the country, which says it sells more iPhones than any other smartphone.

According to Cook, channel inventory reduction and currency headwinds have impacted business in the region and presented some significant economic challenges. Despite this, Cook continues to feel "really good" about Apple's business in China, pointing towards the opening of the 41st retail store in Greater China and a recent $1 billion investment in Didi Chuxing.

With revenue in China down 33 percent, Europe has regained its position as Apple's second biggest market after the United States, bringing in $9.6 billion in revenue during the quarter.

Article Link: Apple's Q3 2016 Revenue Drops 33% in Greater China as Europe Regains Position as Second Biggest Market

 

[jdillings]

Tim probably shouldn't have bet the house on China

 

[iLoveDeveloping]

Maybe Tim will give a crap about everyone in Europe again now..

 

[rp2011]

China's middle class is still growing and the opportunities are still huge. But after bringing the technologies and know how to build these gadgets did we think we would forever loom over them and they not build stuff themselves and then not impliment nationalistic restrictions and tarifs like the kind Trump and others want to impliment on them?

If anyone is shocked it's because you were born yesterday.

 

[kingpushup]

I recall when RIM (Blackberry) bet the house on China... haha not to sound fatalistic, just risky market for many reasons.
[doublepost=1469568979][/doublepost]However Apple seems to be trying to suggest that Chinese still bought more (not less) but channel was sideways.

 

[Keniutek]

Tim has some more sucking up to do.
India next...

 

[nt5672]

Sounds to me like a China slap down for iPhones that are not so easy to monitor/track/trace.

 

[rp2011]

Sounds to me like a China slap down for iPhones that are not so easy to monitor/track/trace.

There is no doubt that many so called knock-offs are just from parts smuggled out of official Apple suppliers or at least supplier sanctioned. Whether Apple likes it or not, Apple will need to invest in automation and build the devices themselves. This is not going to get better but worse. And give away the store to China.

 

[boast]

Just wait for those Apple stores in India. Hello trillion dollar company!!

 

[winston.x]

Has Tim ever not been optimistic about something??

 

[alexmarchuk]

Where's Teddy at...

 

[neutralguy]

Rose gold can only do so much!

 

[x0vash0x]

China's middle class is still growing and the opportunities are still huge. But after bringing the technologies and know how to build these gadgets did we think we would forever loom over them and they not build stuff themselves and then not impliment nationalistic restrictions and tarifs like the kind Trump and others want to impliment on them?

If anyone is shocked it's because you were born yesterday.

It's not that, it's the price point for mass consumption. Just about everyone who has the money buys an iPhone. They're hugely popular. It's not uncommon to walk into a private school in China and see kids with Apple Watches, iPhones, and iPads. Everyone loves Apple.

The problem is you can get incredibly good phones for half the price from Xiaomi (Mi 5) and Huawei (P9). As the middle class grows, so will consumption of Apple Products. I would argue that a lot of the fall in U.S Revenue comes from really bad exchange rate recently. The biggest issue is the lack of Apple Services in China. Chinese buy iPhones than use domestic services from Baidu and Tencent. If China wants to make it big in China, they're going to have to get their services here. But...

China has said they don't want foreign technology companies to have a deep penetration into the Chinese market. Basically, Apple needs to work closely with the Chinese government and placate it if it wants to sell its services there.

 

[Homer69]

In today's third quarter earnings report, Apple revealed a significant drop in revenue from Greater China, which is down 33 percent year over year. Revenue from China was at $8.9 billion in Q3 2016, down from $13 billion in Q3 2015.

During the followup earnings call, Apple CEO Tim Cook said the company continues to be encouraged about growth in the country despite the decline in revenue and remains "very optimistic about growth opportunities."

He said Apple's underlying business is stronger in China than the results imply, with the iPhone install base in the country up 34 percent year over year. Cook cited statistics from China Mobile, one of the largest carriers in the country, which says it sells more iPhones than any other smartphone.

According to Cook, channel inventory reduction and currency headwinds have impacted business in the region and presented some significant economic challenges. Despite this, Cook continues to feel "really good" about Apple's business in China, pointing towards the opening of the 41st retail store in Greater China and a recent $1 billion investment in Didi Chuxing.

With revenue in China down 33 percent, Europe has regained its position as Apple's second biggest market after the United States, bringing in $9.6 billion in revenue during the quarter.

Article Link: Apple's Q3 2016 Revenue Drops 33% in Greater China as Europe Regains Position as Second Biggest Market

 

[rp2011]

It's not that, it's the price point for mass consumption. Just about everyone who has the money buys an iPhone. They're hugely popular. It's not uncommon to walk into a private school in China and see kids with Apple Watches, iPhones, and iPads. Everyone loves Apple.

The problem is you can get incredibly good phones for half the price from Xiaomi (Mi 5) and Huawei (P9). As the middle class grows, so will consumption of Apple Products. I would argue that a lot of the fall in U.S Revenue comes from really bad exchange rate recently. The biggest issue is the lack of Apple Services in China. Chinese buy iPhones than use domestic services from Baidu and Tencent. If China wants to make it big in China, they're going to have to get their services here. But...

China has said they don't want foreign technology companies to have a deep penetration into the Chinese market. Basically, Apple needs to work closely with the Chinese government and placate it if it wants to sell its services there.

Yeahhh, but placating someone today is a temporary thing. Just look at creepy politicians here in the US, everyone and everything is for sale here. Now multiply that by 1000 when it comes to China. Apple can only trust Apple and better diversify sooner than later. Places where we can exploit workers and get away with it are shrinking. And Apple will need to be ready to automate and do everything here at home where their government is the only one who will give them a fair shake. Or at least the fairest shake it's going to get.

 

[Homer69]

Cook was wrong about China market. Sure, iPhones are a hit and affluent Chinese will buy them over the Android flagships. Yet if he thinks his phones can compete with $350 home grown wonders, he will be in the cold for a long time. China is a big n crowded country, and Apple doesn't make products that ordinary Chinese can afford.
I like iPhones, but later I will buy a dual SIM Chinese phone that Apple or Korean manufacturers don't make.
[doublepost=1469581986][/doublepost]Mr. Cook, make a phone that has dual SIM feature! Forget about the US carriers, because the subsidy model is old and stale.

 

[x0vash0x]

Yeahhh, but placating someone today is a temporary thing. Just look at creepy politicians here in the US, everyone and everything is for sale here. Now multiply that by 1000 when it comes to China. Apple can only trust Apple and better diversify sooner than later. Places where we can exploit workers and get away with it are shrinking. And Apple will need to be ready to automate and do everything here at home where their government is the only one who will give them a fair shake. Or at least the fairest shake it's going to get.

Interestingly enough, Foxconn itself has automated 60,000 jobs this past year. Automation is a Chinese government policy to become more competitive.

http://www.theverge.com/2016/5/25/11772222/foxconn-automation-robots-apple-samsung-smartphones
http://uk.reuters.com/article/us-china-robots-forecast-idUKKCN102104

So, really, there's no need for Apple to build anything in America. And technically, it's not even Apple building these products, but Foxconn and other suppliers. Foxconn itself is diversifying its locations and manufacturing. Ideally, Foxconn would open a plant in the U.S. but I doubt it'll do it until it has its automation system down as there's no way it's going to pay U.S employees $15+/Hr to make computer components.

What Apple should do is some kind of joint venture with an online services company like Baidu or Tencent. China wants its domestic companies to benefit from Apple's growth, not loose to it. That's what I mean by placate, Tim needs to convince China that Chinese companies will benefit from Apple's success.

The ideal compromise, I think, is that Apple provides the technical infrastructure, while Baidu/Tencent/Alibaba provide the content (movies, games, TV Shows). Apple can work with U.S content partners as a middleman to bring more TV Shows/Music/Movies to China. Basically, Apple needs to be a middleman, something it desperately doesn't want to do. But, it will need to change its way of doing business to gain traction in China. China will outright block Apple services if it feels it'll damage domestic companies.

 

[rp2011]

Interestingly enough, Foxconn itself has automated 60,000 jobs this past year. Automation is a Chinese government policy to become more competitive.

http://www.theverge.com/2016/5/25/11772222/foxconn-automation-robots-apple-samsung-smartphones
http://uk.reuters.com/article/us-china-robots-forecast-idUKKCN102104

So, really, there's no need for Apple to build anything in America. And technically, it's not even Apple building these products, but Foxconn and other suppliers. Foxconn itself is diversifying its locations and manufacturing. Ideally, Foxconn would open a plant in the U.S. but I doubt it'll do it until it has its automation system down as there's no way it's going to pay U.S employees $15+/Hr to make computer components.

What Apple should do is some kind of joint venture with an online services company like Baidu or Tencent. China wants its domestic companies to benefit from Apple's growth, not loose to it. That's what I mean by placate, Tim needs to convince China that Chinese companies will benefit from Apple's success.

The ideal compromise, I think, is that Apple provides the technical infrastructure, while Baidu/Tencent/Alibaba provide the content (movies, games, TV Shows). Apple can work with U.S content partners as a middleman to bring more TV Shows/Music/Movies to China. Basically, Apple needs to be a middleman, something it desperately doesn't want to do. But, it will need to change its way of doing business to gain traction in China. China will outright block Apple services if it feels it'll damage domestic companies.

Of course there is. Now more than ever. Why put all of you eggs on foreign soil where they will stomp on you without notice. Where they will steal your intellectual property without blinking. Where Foxconn and the rest of the suppliers are selling your iPhone parts to be counterfeited. Now is the best time. It's not about cheap labor anymore. The stakes are far far bigger.

 

[Cole Slaw]

Of course there is. Now more than ever. Why put all of you eggs on foreign soil where they will stomp on you without notice. Where they will steal your intellectual property without blinking. Where Foxconn and the rest of the suppliers are selling your iPhone parts to be counterfeited. Now is the best time. It's not about cheap labor anymore. The stakes are far far bigger.

There's truth there.
You don't really want to have all your high-tech industrial capacity located in another country, especially one that is becoming a military rival and potential future enemy.
Making everything in another country like China may be in the interests of corporations, but not necessarily in the greater national interest.

 

[vooke]

This is good news.
Look, the smaller the Chinese market, the fewer reasons Apple have to lick their rear by having the products manufactured from there.

 

[x0vash0x]

The xenophobia and lack of economic understanding in this thread is amazing.

Also, Xiaomi is a great example of why Apple is having a hard time in China.

https://www.engadget.com/2016/07/27/xiaomi-mi-notebook-air-laptop-china/
https://www.engadget.com/2016/07/27/xiaomi-redmi-pro-china/

Basically, Apple products, for half the price. You'd be stupid not to at least entertain the thought of getting these products, especially in the Chinese market.

Apple needs lower price point items to make an impact into the Chinese market. This, and services. Like I said before, if Apple wants to make inroads, it needs o change its business model.

 

[alexmarchuk]

The xenophobia and lack of economic understanding in this thread is amazing.

Also, Xiaomi is a great example of why Apple is having a hard time in China.

https://www.engadget.com/2016/07/27/xiaomi-mi-notebook-air-laptop-china/
https://www.engadget.com/2016/07/27/xiaomi-redmi-pro-china/

Basically, Apple products, for half the price. You'd be stupid not to at least entertain the thought of getting these products, especially in the Chinese market.

Apple needs lower price point items to make an impact into the Chinese market. This, and services. Like I said before, if Apple wants to make inroads, it needs o change its business model.

China is very materialistic, the iPhone is a status symbol.

 

[MH01]

Oww Tim, you have to double down on those efforts to win over the Chinese.

Those emoji and stickers are gonna win them back !!

 

[BollywooD]

This isn't surprising for me (at least)... I have virtually 0 sales of apps in China. Germany is my second biggest market after the U.S.

 

[Savor]

Chinese are like the chefs that cook Apple's recipe but won't eat at the same restaurant they make it in. They can go to a different resto, have another Chinese chefs copy the recipe, and eat it there because the prices are offered cheaper.

China is too cut throat right now anyway. Both China and India are very difficult to break through. It is a game of music chairs with so many different brands on top with different price points. Chinese need dual-sim and Apple hasn't offered an iPhone like that yet.

I just found out Oppo topped Huawei. Last year, Huawei was #1. Two years ago, Samsung and Xiaomi were tops. Xiaomi was dubbed the Apple of China at one point. A year before that, Lenovo was tops. You see where am I getting at? None one OEM stays #1 for very long in China. It can change every few months. For all we know after watching Captain America: Civil War, Vivo could be next in line to be the #1.

^ Look how fast Oppo accelerated at #1 from two years ago. Look how fast Samsung and Xiaomi fell from since. Volatile market. Oppo is stalling Huawei from catching Apple at #2 globally within a few years.