ecns [expanded by feedex.net]: In China, glass is barely half full for Apple

ecns [expanded by feedex.net]

ecns

In China, glass is barely half full for Apple
http://www.ecns.cn/2016/01-29/197605.shtml
Jan 29th 2016, 11:34





Friday Jan 29, 2016






Strangely few people applauded Apple for making the largest quarterly earnings by any company. Instead, many media outlets seem to regard it as a cause for concern, especially because of iPhone's "dubious" future in China.
Does the predicted first decline in iPhone sales in the current quarter really signify the beginning of the end of a technological era ushered in by the market-leading, life-changing iPhone? This is open to debate, because it is difficult to say how dim the global growth prospect will become and whether Apple can wow the world again with another wonderful product.
But any suggestion that the Chinese market is losing luster as one of the key growth drivers, if not the most important one, for Apple deserves a closer look against the less-noticed reality of steady consumer growth in China, as opposed to the downbeat news on the country's industrial sector.
Apple sold 74.8 million iPhones in its fiscal first quarter ending in Dec 26. Though its sales did not beat market expectations and net income increased only 2 percent, the lowest year-on-year quarterly growth since the introduction of the lifestyle-changing handsets in 2007, Apple still made $18.4 billion in profit in the last quarter of 2015, beating the record it had set a year earlier.
Apple's performance is remarkable not only because it came against the backdrop of a sluggish global economy but also because it was achieved despite China's slowest economic growth in a quarter century and increasing competition from local smartphone makers. The company's revenue from Chinese buyers in the last quarter of 2015 increased 14 percent year-on-year accounting for a quarter of its total global revenue. Had Chinese consumers shown signs of cutting their spending on iPhones because of the slowing growth at home, fears that Apple's sales in China could falter would make economic sense.
But in the absence of such signs, Apple's sales do not support media headlines like "With China weakening, Apple turns to India" or "China's smartphone slowdown bites Apples". Total iPhone sales grew 76 percent in India, Apple said. That kind of growth should be exciting, but the gap between the average 450,000 smartphone shipments per quarter in India in 2015 and more than 15 million per quarter in China seems less wide than that between the reality and illusion depicted by the headlines.
Perhaps that's why Apple CEO Tim Cook insisted: "We remain very bullish on China, and, you know, don't subscribe to the doom and gloom kind of predictions frankly."
On the global front, the saturating demand for smartphones, especially high-end ones like iPhones, is a worry as a repeat of 2008 looms over the world economy. Yet the potential of the Chinese market has not been fully tapped by either Apple or its rising rivals. Chinese consumers' appetite for innovative products can only intensify with the steady increase in the country's average income. China's urban per capita disposable income reached 31,195 yuan ($4742.28) in 2015, compared with 19,109.4 yuan in 2010. Although the more than 50 percent rise does not mean the next five years will see similar income growth or Chinese consumers will always ignore economic slowdown, it does indicate that, as the price of iPhone as a share of their income continuously declines, it is more than likely that their demand will not peak any time soon.
Moreover, the capability of Chinese companies to provide more smartphones to compete with Apple should also be appreciated as part of the country's efforts to promote supply-side reform aimed at significantly expanding the width and depth of the consumer market.
Should not Apple be prepared to win its fair share of a bigger pie instead of claiming it is full now?
The author Zhu Qiwen is a senior writer with China Daily.
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