Apple’s Slowing Growth in China

The Atlantic’s Derek Thompson attributes Apple’s disappointing performance last quarter to economic slowdown in China and elsewhere in Asia:

Apple future, to the extent that it can continue to be the world’s most profitable company, is in Asia. That’s where the people are and that’s where the growth is. [… N]ot only did Apple’s YoY revenue decline across the world in the global slowdown, but also its Asian revenue growth slowed wayyyyy down.

In China, Apple’s second biggest market, revenue rose about 50% from 2011, but that growth was way down from the second quarter. Evidence abounds that the Chinese economy is worse than the government will let on and weaker than its been since the recession in 2008.

[… T]his quarter’s announcement was a reminder that the most successful tech company in the world is still in the world, and when the whole world slows down, Apple feels it. Although it’s essentially an American hardware company, Apple’s future makes it look more like an Asian phone company. In its historically profitable quarters, Asian revenue growth outstrips the Americas by two or three to one. Without a new phone or strong Asian growth, it can disappoint — even at $8 billion quarterly profit.

The Economist reports that, despite the disappointing results and dents in its reputation from environmental and labour controversies, the Chinese market for Apple’s and others’ gadgets is booming:

A survey last year by researchers at Stanford University found that iPad penetration was greater at an elite high school in Beijing than at one in Palo Alto, California. In the first quarter of this year Apple earned $7.9 billion in greater China, making it the firm’s second-biggest market (see chart). The latest iPad was launched on the mainland on July 20th.

[…] Sales of smartphones (of all brands) in China are soaring: they rose by 288% in April, year-on-year, and for the first time outpaced the sales of dumbphones. Sanford C. Bernstein, an investment bank, estimates that 270m people in China can already afford Apple’s products, and that each year another 57m will be able to. Many Chinese are desperate for its gadgets. This year a boy from Anhui, one of China’s poorest provinces, reportedly sold one of his kidneys to buy an iPhone and iPad.

[… One] problem for Apple is that smartphone sales in China are driven mostly by cheap handsets. Sanford C. Bernstein estimates that two-thirds of smartphones sold last year in the country cost less than $300; the latest iPhone costs $800. Baidu, Alibaba and other local internet firms have introduced cheap cloud-connected handsets. Price competition at the bottom end of the market is so fierce that ZTE, a local handset maker, is thought to be losing money.

Apple’s roughly annual release cycle and tendency to refresh devices’ cosmetic design even less frequently has also given competitors an opening. From Reuters:

“The (iPhone 4S) model is a little bit too long in the tooth when compared to other phones with better specs,” said TZ Wong, a Beijing-based analyst from research firm IDC.

“To put it plainly, consumers are getting a little bit tired of the look of the iPhone 4 and the iPhone 4S.”

[…] Apple is expected to release its next iPhone around October, according to sources, about a year after the launch of the 4S, which was a hot seller in the first three months of 2012 and helped to drive Apple’s stellar earnings in that period.

See also ‘Siri Learns Chinese’ and ‘Apple Releases 2012 Supplier Responsibility Report’ on China Digital Times

CDT EBOOKS

Subscribe to CDT

SUPPORT CDT

Browsers Unbounded by Lantern

Now, you can combat internet censorship in a new way: by toggling the switch below while browsing China Digital Times, you can provide a secure "bridge" for people who want to freely access information. This open-source project is powered by Lantern, know more about this project.

Google Ads 1

Giving Assistant

Google Ads 2

Anti-censorship Tools

Life Without Walls

Click on the image to download Firefly for circumvention

Open popup
X

Welcome back!

CDT is a non-profit media site, and we need your support. Your contribution will help us provide more translations, breaking news, and other content you love.