Apple blames China for revenue fall
- Apple said production headwinds caused by Covid-19 disruptions in China dragged down the supply of iPhones.
- The iPhone maker saw sales decline in all regions, however China registered the biggest decrease in the quarter.
- Cook said India is a “hugely exciting” market and that Apple is putting “a lot of emphasis” on it.
Apple Inc just recorded its first quarterly decline since 2019 and, for the first time since 2015, the company missed analysts’ holiday sales projections — thanks to China, one of the tech giant’s biggest markets. Although the iPhone maker saw sales decline in all regions, China registered the biggest decrease in its first quarter.
Apple CEO Tim Cook, during an earnings call, said that “Covid-19 challenges significantly impacted the supply of iPhone 14 Pro and iPhone 14 Pro Max and lasted through most of December.” To recall, the company issued a warning to investors on November 6 that Covid-19 restrictions in China had impacted its primary iPhone 14 Pro and iPhone 14 Pro Max assembly hub in Zhengzhou.
As a result, shipment volumes of the two new models would be lower than expected while customers would experience longer wait times to receive new products, the company said. Therefore, for the three months up to December 31, Apple’s revenue declined 5.5% on the year to US$117.2 billion. Sales of the company’s cash cow, the iPhone, decreased 8.2% on the year to US$65.8 billion while profit tumbled 13.4% to US$30 billion.
“Foreign exchange headwinds” with a strong dollar and “a challenging macroeconomic environment” also weighed on earnings, Cook said. As for other products, like Mac, the company made US$7.74 billion, far short of the US$9.7 billion estimate, according to Bloomberg’s report.
“That’s also a significant drop from US$10.9 billion a year ago,” the report noted. The wearables, home and accessories division — a unit that includes the Apple Watch, HomePod speakers, Apple TV, AirPods and Beats products — brought in US$13.5 billion.
The iPad meanwhile brought in US$9.4 billion, beating the estimate of US$7.8 billion. Other areas also fared better and according to Chief Financial Officer Luca Maestri, the services revenue was a record total. Holding currency constant the company increased its overall sales.
Apple: recovery in China, strength in India & growth in SEA
As emphasized by Cook, Greater China, which covers mainland China, Hong Kong and Taiwan, suffered the sharpest revenue decline of all regions in the quarter with a 7.3% year-on-year (YoY) drop to US$23.9 billion. The upside though is that “production is now back where we want it to be,” Cook shared.
Apple also shared that it set all-time revenue records in some markets during the quarter including Indonesia and Vietnam, along with quarterly records in India. Interestingly, in India Cook sees growth in the “strong double digits”, not specifying numbers. He stated that the South Asian nation is a “hugely exciting” market, and that Apple is putting “a lot of emphasis” on it.
Cook also teased that India will “soon” have brick-and-mortar shops after launching an online store in the country in 2020. To recall, Apple has been expanding its manufacturing capacity in India, where it is also ramping up iPhone production. In fact, the company’s major product manufacturer Foxconn Technology Group, in December injected US$500 million into its Indian subsidiary.
As per Tech Wire Asia’s previous report, India is expected to assemble as much as half of the world’s iPhones by 2027, based on a forecast by Taiwan-based DigiTimes Research. That would be a significant increase from the 5% currently assembled in the country. JPMorgan also estimated in September that India would be making a quarter of all iPhones by 2025.