Is a China Takeover On Apple’s Mind?
If investor reaction is anything to go by, there was nothing even remotely positive going on for Apple (NASDAQ:AAPL) in the December-ending quarter. The truth, though, is that not only did the company bring in overall record iPhone and iPad sales, it also managed to sustain a high growth rate in China, the world’s largest smartphone market and increasingly Apple’s most important.
The company saw a 67 percent boost in revenue in the Greater China region to $6.83 billion. Chief executive Tim Cook told analysts on the post-earnings conference call that outlets in China selling the iPhone rose to 17,000 from 7,000 a year earlier. “This isn’t nearly what we need, we’re not even close to that, but we’re making great progress,” Cook said. “And I was talking to a lot of different people and I am very happy with how things are going.”
The Greater China region, which includes Hong Kong and Taiwan, accounted for 13 percent of Apple’s total sales this time compared with 8.8 percent a year earlier.
“They are investing in distribution as a way to grow the market,” Gartner analyst Sandy Shen told Bloomberg. “They have well penetrated the tier-one and tier-two cities, so now they are looking to expand to the lower tier cities by partnering with distributors and retailers.
However, the company did slip to sixth place in China’s smartphone market in the third quarter of last year as local rivals with cheaper devices started making inroads. There has been a lot of talk about whether Apple needed to launch a cheaper smartphone targeted at these high-growth and cost-conscious markets in order to regain momentum. Cook refused to divulge his company’s plans for a new product, per usual, but stressed on the fact that iPhone growth in the region had been in triple digits.
In addition, analysts believe that a partnership with China Mobile (NYSE:CHL), the world’s largest wireless carrier by number of subscribers, was imperative for Apple this year. Earlier this month, Cook met China Mobile chairman Xi Guohua in Beijing and the two reportedly discussed “cooperation,” so it’s clear that China is high on Apple’s priority list.
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