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

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

(View all)
Avatar
10 months ago
Maybe Tim will give a crap about everyone in Europe again now..
Rating: 10 Votes
Avatar
10 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.
Rating: 2 Votes
Avatar
10 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.


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.
Rating: 2 Votes
Avatar
10 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.
Rating: 2 Votes
Avatar
10 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.
Rating: 2 Votes
Avatar
10 months ago
Has Tim ever not been optimistic about something??
Rating: 2 Votes
Avatar
10 months ago
Tim probably shouldn't have bet the house on China
Rating: 2 Votes
Avatar
10 months ago
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.
Rating: 1 Votes
Avatar
10 months ago

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.
Rating: 1 Votes
Avatar
10 months ago
Where's Teddy at...
Rating: 1 Votes
[ Read All Comments ]