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

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china-flagIn 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.

Tag: China

Top Rated Comments

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56 months ago
Maybe Tim will give a crap about everyone in Europe again now..
Score: 10 Votes (Like | Disagree)
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56 months ago
Has Tim ever not been optimistic about something??
Score: 2 Votes (Like | Disagree)
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56 months ago
Tim probably shouldn't have bet the house on China
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56 months ago
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.
Score: 2 Votes (Like | Disagree)
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56 months ago

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.
Score: 2 Votes (Like | Disagree)
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56 months ago

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.
Score: 2 Votes (Like | Disagree)

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