Tim Cook Is Not Worried About Apple’s Slowing Business in China

While Apple yesterday (Aug. 2) reported better-than-expected quarterly results, its business in China appears to be lagging. During the April-June quarter, the iPhone maker brought in $85.9 billion in revenue, up 5 percent from the same period last year and a new record. Net income came at $21.4 billion, up 8 percent year-over-year. Both figures beat Wall Street expectations. However, Apple’s sales in China, its largest market outside the U.S., fell short of expectations at $14.7 billion and decreased by more than 6 percent compared to the same period a year prior. The disappointing results continue a trend seen in the preceding quarter, as China’s flagging economy suppresses consumer demand.

The region has also become increasingly crowded with smartphone makers. In July, Apple fell from China’s top five handset makers by shipments as local rivals like Huawei and Vivo gained ground. “Certainly the [environment] there is the most competitive in the world,” Apple CEO Tim Cook told analysts on the earnings call yesterday.

However, Apple’s falling sales were also influenced by exchange rates, according to Cook. “If you look at it on a constant currency basis, we declined by less than 3 [percent],” he said, reiterating his confidence in Apple’s “long-term growth opportunity in China.”

Despite Cook’s attempt to soothe concern about Apple’s foothold in China, Apple has in recent years increasingly pivoted toward India as a major supplier and market amid geopolitical tensions between China and the U.S. While Apple didn’t break out its sales in India for its quarterly earnings, Morgan Stanley analysts earlier this year noted that Apple’s 2023 revenue in India rose by 42 percent to $8.7 billion, while its iPhone shipments in the region jumped by 39 percent to 9.2 million. India represented 4 percent of iPhone shipments and revenue for the year, up 3 percent compared to 2022, while China’s share fell by 1 percent to 20 percent.

Apple is shifting its focus from China to India

Last year, Apple opened two retail stores in the country, with plans to open three more by 2027. It has amped up its iPhone manufacturing in the area and doubled its production during the previous fiscal year (October 2022 to October 2023) to $14 billion worth of iPhones, meaning one in seven devices came from India. Apple is reportedly planning on expanding its manufacturing activities in the country to include assembly of its Pro iPhone series later this year.

The company’s iPhone sales for the April-June quarter reached $39.3 billion, surpassing Wall Street estimates, although the figures declined by 1 percent from last year. Mac sales rose by 3 percent to $7 billion, while iPad sales, boosted by the release of new models in recent months, shot up by nearly 24 percent to $7.2 billion.

Apple device sales are expected to benefit from the release of the company’s new suite of A.I. features, known as Apple Intelligence, as they are introduced later this year across more recent Apple products like the iPhone 15 Pro and iPhone 15 Pro Max. “We’re very excited about Apple Intelligence and what it brings,” said Cook on the earnings call. “It’s another compelling reason for an upgrade.”