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China sees “amazing” growth, becomes second largest Apple market

post #1 of 46
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During Apple's quarterly earnings call on Tuesday, the company detailed record sales of $4.5 billion in China for the September quarter, highlighting "amazing" progress in the region and continued opportunities among its burgeoning middle class.

Apple CEO Tim Cook said that China has become Apples second largest country in terms of revenue. The China progress has been amazing, he said, concluding that the area shows enormous opportunity for the company.

He added that the Cupertino, Calif., company will do everything its doing in the United States to sustain growth in the region, with strategies such as retail stores, online, APR channel, 3rd party channel and advertising. Cook further acknowledged that he has never seen a country with so many people moving into the middle class interested in buying Apple products.

Revenue in the Asia Pacific region grew by 139 percent year over year, or $6.53 billion. By comparison, the Americas and Europe generated $9.64 billion and $7.39 billion, respectively.

In China, revenue rose from 2 percent in 2009 to 12 percent this year and 16 percent this quarter, thus making China the fastest growing region by far. Total revenue for China amounted to $15 billion for fiscal year 2011 compared to $3 billion in the previous year. Apple last quarter reported $3.8 billion in revenue in the region.

Line waiting to enter IFC Mall Apple Store in Hong Kong. Credit: Gary Allen/ifoAppleStore via Flickr.

The company recently opened its sixth store in the Greater China region, an impressive flagship location situated in Hong Kong. Combined, the existing five retail stores in mainland China accounted for the most store traffic during the fourth quarter. Apple reported a record of 77.5 million visitors for its 357 stores in the September quarter with revenues averaging at $10.7 million per store.

On top of the company's official retail stores, there are 7,000 points of sale in Greater China for the iPhone.

Apple is looking to further consolidate its position in China by investing in more stores and other unspecified projects. The company reportedly said last year that it plans to open 25 retail stores in the region within the next few years. Apple is set to open 40 new retail stores globally in the first quarter of fiscal year 2012, with 75 percent of them planned for countries outside the U.S.

Earlier this year, the iPhone maker indicated plans to learn from its successes in China as it turns its attention to other emerging markets. As such, the company has said it will also focus on other regions in the following quarters including Brazil, Russia and the Middle East.

Revenue in Brazil topped $900 million last quarter, up 118 percent year over year. According to Cook, Russia is looking "more promising," while the Middle East poses "significant opportunities" for Apple.
post #2 of 46
Nice to see Apple's China strategy paying off handsomely.

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post #3 of 46
Just for reference - this explains why Apple's overseas cash is growing so quickly. There's no way for them to easily bring that cash into the U.S. without paying taxes.
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post #4 of 46
Quote:
Originally Posted by jragosta View Post

Just for reference - this explains why Apple's overseas cash is growing so quickly. There's no way for them to easily bring that cash into the U.S. without paying taxes.

Are you suggesting this is good or bad... or just noting a fact?

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post #5 of 46
Great to hear. So many people here a while back were stating 'for a fact' that hardly anyone in China could afford anything Apple made.
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post #6 of 46
I don't think people realize how big of a monster the China market is going to be for Apple. The Chinese are probably the most brand-conscious consumers in the world and Apple is the most accessible of the top-line aspirational brands. Not that many people can afford a Mercedes Benz or a BMW, but a Mac, iPad or iPhone? Hell, yeah!

Somebody crunch the numbers and tell us what a whole generation of Chinese with rapidly rising incomes means for Apple's revenues and profits.
post #7 of 46
Quote:
Originally Posted by SpamSandwich View Post

Are you suggesting this is good or bad... or just noting a fact?

I'm just posting a fact. People in another thread were complaining that Apple has so much cash overseas. That's an inevitable result of the fact that they sell so much product overseas.
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post #8 of 46
Good to see another countries middle class growing instead of vanishing I guess...ugh
post #9 of 46
Quote:
Originally Posted by jragosta View Post

I'm just posting a fact. People in another thread were complaining that Apple has so much cash overseas. That's an inevitable result of the fact that they sell so much product overseas.

Correct.

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post #10 of 46
Quote:
Originally Posted by tundraboy View Post

I don't think people realize how big of a monster the China market is going to be for Apple. The Chinese are probably the most brand-conscious consumers in the world and Apple is the most accessible of the top-line aspirational brands. Not that many people can afford a Mercedes Benz or a BMW, but a Mac, iPad or iPhone? Hell, yeah!

Somebody crunch the numbers and tell us what a whole generation of Chinese with rapidly rising incomes means for Apple's revenues and profits.

The reason why Chinese can not afford a BMW or Mercedes Benz is because the price of the same car is doubled or tripled in China compares to US or Europe...
post #11 of 46
Where are all the naysayers proclaiming only poor people live in China?
post #12 of 46
Quote:
Originally Posted by mdriftmeyer View Post

Where are all the naysayers proclaiming only poor people live in China?

Where are the numbers that break down where the sales are?
Taiwan, Hong Kong and Macao are included in "Greater China."

Nonetheless the market in China has grown amazingly.
post #13 of 46
Quote:
Originally Posted by mdriftmeyer View Post

Where are all the naysayers proclaiming only poor people live in China?

Because they're ignorant.

Yes, a heck of a lot of poor people live in China, but we're talking about a country with a population of over a billion.

As of 2009:
The U.S.: 307,006,550 people.
CHINA: 1,331,460,000 people, and growing at twice the rate that the U.S. is.
post #14 of 46
Quote:
Originally Posted by digitalclips View Post

Great to hear. So many people here a while back were stating 'for a fact' that hardly anyone in China could afford anything Apple made.

It's not that they can't afford it. Their population is so huge, that their 1% upper-class population is like 60% of our population. Ok that was a huge exaggeration, but you get the point. We hear about the sweat shops and low wages because the low-class population is huge. The good jobs are already filled, leaving the poorer people to fight for sweat shop jobs. They can't just have kids and get on welfare like people can here in the states.

It's safe to state that there are more rich people in china than there are in the united states. There are also exponentially more poor people there than there are here.
post #15 of 46
Quote:
Originally Posted by jragosta View Post

Just for reference - this explains why Apple's overseas cash is growing so quickly. There's no way for them to easily bring that cash into the U.S. without paying taxes.

I'd be all for a tax holiday for US Companies to repatriate stranded assets . . . But only if:
1.) they are legally based in the US (not the Caymans, etc.)
2.) they have paid some minimum percentage of their revenues as taxes over the last 5 years
and
3.) only on money that they will then pay to stockholders in dividends.

(This would probably be of no use to Google.)
post #16 of 46
A few days ago there was a report about the price of a iPhone in China going for $1k US on the grey market. If the grey market is charging such a high price then how is it that regular Apple stores are doing do well?

There's some PR bullshit going on here...

When Apple first released the iPhone in China a few years back, sales were dismal, now we're supposed to believe China is the leading market for Apple? Complete BS.
post #17 of 46
Quote:
Originally Posted by 2oh1 View Post

Because they're ignorant.

Yes, a heck of a lot of poor people live in China, but we're talking about a country with a population of over a billion.

As of 2009:
The U.S.: 307,006,550 people.
CHINA: 1,331,460,000 people, and growing at twice the rate that the U.S. is.

Yes! And bigger *is* better, as is obvious to anyone.
post #18 of 46
Maybe when we get 1 billion people in America we will help Apple even more. Can Apple produce 500 million iPhones?? What would that do to the cell network over there? Although China is mostly poor having the nich in the market helps anyway.
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post #19 of 46
Quote:
Originally Posted by lessismore View Post

The reason why Chinese can not afford a BMW or Mercedes Benz is because the price of the same car is doubled or tripled in China compares to US or Europe...

I suggest you try and understand BMW's own perspective on this issue (happy to give you MB's too, if you like): http://www.bmwgroup.com/e/0_0_www_bm...S_20110517.pdf
post #20 of 46
Quote:
Originally Posted by Sofabutt View Post

A few days ago there was a report about the price of a iPhone in China going for $1k US on the grey market. If the grey market is charging such a high price then how is it that regular Apple stores are doing do well?

There's some PR bullshit going on here...

When Apple first released the iPhone in China a few years back, sales were dismal, now we're supposed to believe China is the leading market for Apple? Complete BS.

Nobody said it was they leading market. It is the third largest market expected to become the second largest market. But why is that surprising? Over 1.3 billion people and including Taiwan, and Hong Kong. I imagine the "greater China" market includes more people than the US, Europe, Canada and Australia combined.
post #21 of 46
Quote:
Originally Posted by DESuserIGN View Post

3.) only on money that they will then pay to stockholders in dividends.

Why would you want to make the companies do something so incredibly tax-inefficient?

You might as well not bother wasting time trying to implement such a policy, since few would bother.

PS: Apple does not pay dividends either.
post #22 of 46
Quote:
Originally Posted by tundraboy View Post

I don't think people realize how big of a monster the China market is going to be for Apple. The Chinese are probably the most brand-conscious consumers in the world and Apple is the most accessible of the top-line aspirational brands. Not that many people can afford a Mercedes Benz or a BMW, but a Mac, iPad or iPhone? Hell, yeah!

Somebody crunch the numbers and tell us what a whole generation of Chinese with rapidly rising incomes means for Apple's revenues and profits.

Oh, I realize it. Currently, there are around 3x the number of mobile phones (all types) in use in China compared to the U.S. That's over 900 million phones in use, in China, TODAY. Apple's going after people with regular flip phones who have yet to step up to a smart phone.

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post #23 of 46
Quote:
Originally Posted by DESuserIGN View Post

Yes! And bigger *is* better, as is obvious to anyone.

Who said anything about "better"? China has a billion more people for Apple to sell products to than the U.S. That's one massive market to sell to.
post #24 of 46
Quote:
Originally Posted by Sofabutt View Post

There's some PR bullshit going on here...

When Apple first released the iPhone in China a few years back, sales were dismal, now we're supposed to believe China is the leading market for Apple? Complete BS.

You're not thinking logically. China has 1.3 billion people. Think about that in terms of potential sales. The importance of making inroads into China can't be overstated. It's 1.3 billion people to sell your products to.

Also, when the original iPhone was released, Apple had no real presence in China. As Apple opens stores there, Apple creates a market there.
post #25 of 46
Quote:
Originally Posted by Sofabutt View Post

A few days ago there was a report about the price of a iPhone in China going for $1k US on the grey market. If the grey market is charging such a high price then how is it that regular Apple stores are doing do well?

It's quite simple - the launch of new iPhone models in China lags that of other markets. So if you for instance were lucky enough to get an iPhone 4s on launch day in the US, and promptly planned a trip to China, you could sell it for a nice profit over here. There are lots of folks here who are willing to pay to get the latest and greatest first (or be amongst the first).

Of course, once the latest model is officially launched here the grey market prices will come down. It's all about supply and demand.

Quote:
Originally Posted by Sofabutt View Post

There's some PR bullshit going on here...

Not BS at all. Get over here to any large city and it's iPhone iPhone everywhere. It's hard to think that pre-iPhone the Nokia N-series was all the rage here, it's amazing how quickly things change.

Quote:
Originally Posted by Sofabutt View Post

When Apple first released the iPhone in China a few years back, sales were dismal, now we're supposed to believe China is the leading market for Apple? Complete BS.

Two reasons - the original Chinese iPhone 3G was crippled (did not have wi-fi) and secondly it was only sold through China Unicom and you had to sign up for a contract to get one (there were no Apple stores at the time). However, don't forget that even before the official launch of the iPhone in China there was already a huge number of grey-market iPhones in use.
post #26 of 46
Quote:
Originally Posted by lessismore View Post

The reason why Chinese can not afford a BMW or Mercedes Benz is because the price of the same car is doubled or tripled in China compares to US or Europe...

For locally produced models (3-series, 5-series, C-class, E-class) the price difference is closer to 50-60%. Yes, they're still overpriced (IMHO) but that doesn't seem to be stopping the Chinese nouveau riche or nouveau wannabes.

However, you are right for imported models the price can be double or triple that of the US. Though much of that is also due to higher taxes, especially for models with larger displacement engines (larger than 2.5L). But this makes it even more shocking that China is already the biggest market for top BMW models such as the 7-series, X6, 5-series GT, etc. (see the ppt posted by the other poster above).
post #27 of 46
Why were the Japan results poor? I thought iphone was doing better there since they added the customized/localized emoticons. Or is it just that Japan's economy is bad right now?
post #28 of 46
Quote:
Originally Posted by anantksundaram View Post

I suggest you try and understand BMW's own perspective on this issue (happy to give you MB's too, if you like): http://www.bmwgroup.com/e/0_0_www_bm...S_20110517.pdf

Thanks for posting this, slide 7 confirms something that I have suspected through observation (that China is already the top market for 7-series and 5-series). I'm pretty sure they will take the #2 spot from the US this year.

Could you also post the info for MB? MB isn't quite as popular as BMW over here (aside from the S-class, go figure), though now with local production of the C- and E-class it is expected to grow.
post #29 of 46
Quote:
Originally Posted by interwebs View Post

Why were the Japan results poor? I thought iphone was doing better there since they added the customized/localized emoticons. Or is it just that Japan's economy is bad right now?

Japan is hurting right now. Sales of luxury goods have also fallen in general, not necessarily because people can't afford them, but rather the events of this year have made a lot of folks reconsider what is most important.
post #30 of 46
Quote:
Originally Posted by anantksundaram View Post

I suggest you try and understand BMW's own perspective on this issue (happy to give you MB's too, if you like): http://www.bmwgroup.com/e/0_0_www_bm...S_20110517.pdf

Also interesting is slide 25, though I think they are understating the actual #'s (there is a lot of grey income over here that doesn't get reported), but if you just consider the growth rate that's quite stunning. If true it also means that the property bubble here won't collapse anytime soon, though it is hard for me to grasp how high real estate prices could go given that I have already watched the price of my apartment here triple-quadruple in the last 5 years.

In anycase, Apple's China strategy will pay off handsomely.
post #31 of 46
Quote:
Originally Posted by anantksundaram View Post

Why would you want to make the companies do something so incredibly tax-inefficient?

You might as well not bother wasting time trying to implement such a policy, since few would bother.

PS: Apple does not pay dividends either.


Why tax inefficient? It's a tax holiday. Anything they pay in dividends would not be taxed. It would allow Apple to repatriate cash that would otherwise be taxed at around 30%, distribute it to the owners, stimulate the US economy instead of just being used, as many companies did last time, to move more jobs out of the US, and the money would still be taxed as dividends. As a shareholder I don't mind paying taxes (of course most of my portfolio is tax sheltered.)

Apple doesn't pay dividends? Odd I've received dividends from Apple many, many times (just not in the last 15 years or so.)

When Apple's growth tapers they'll pay dividends again. They can't just keep $80+B of shareholders' money. That's over $80/share.
post #32 of 46
Quote:
Originally Posted by anantksundaram View Post

I suggest you try and understand BMW's own perspective on this issue (happy to give you MB's too, if you like): http://www.bmwgroup.com/e/0_0_www_bm...S_20110517.pdf

Thanks for the information.
My point is, if the tax rate imposed to the import cars is not that high. I think the result will be even better. Maybe China could easily become the largest market for BMW and MB...
post #33 of 46
Quote:
Originally Posted by AIA View Post

For locally produced models (3-series, 5-series, C-class, E-class) the price difference is closer to 50-60%. Yes, they're still overpriced (IMHO) but that doesn't seem to be stopping the Chinese nouveau riche or nouveau wannabes.

However, you are right for imported models the price can be double or triple that of the US. Though much of that is also due to higher taxes, especially for models with larger displacement engines (larger than 2.5L). But this makes it even more shocking that China is already the biggest market for top BMW models such as the 7-series, X6, 5-series GT, etc. (see the ppt posted by the other poster above).

Agreed!
For the local made ones, the price are relatively low, but the quality compares to the import ones) is different. In fact, the Made in China stuffs are still low quality even in Chinese customers perception.

Tax is another major issue. To protect the local automobile manufactures, Chinese government impose really high rate of tax to these import goods. China is not a free market at all.
post #34 of 46
Quote:
Originally Posted by DESuserIGN View Post

Where are the numbers that break down where the sales are?
Taiwan, Hong Kong and Macao are included in "Greater China."

Nonetheless the market in China has grown amazingly.

taiwan has about 23million ppl while hong kong + macau have about 8millions. mainland has about 1.3billion.

let us say the top 1% of chinese have iPhone, so it would be 13million. the portion from taiwan/macau/hongkong would be around 1million max. so we can be pretty much sure that the number for the greater china is mainly for the mainland china and much contribution from these 3 areas will be a rounding error.

for fy11, apple made $13billion sale in china, including iPhone and macs etc. let us roughly round it up that $13billion are all for iPhone. and further if an iPhone is for $1000, thus there are about 13million chinese who are using iPhones.
post #35 of 46
Quote:
Originally Posted by DESuserIGN View Post

I'd be all for a tax holiday for US Companies to repatriate stranded assets . . . But only if:
1.) they are legally based in the US (not the Caymans, etc.)
2.) they have paid some minimum percentage of their revenues as taxes over the last 5 years
and
3.) only on money that they will then pay to stockholders in dividends.

(This would probably be of no use to Google.)

#1 and #2 are OK. #3 makes no sense. The purpose of the tax holiday is to spur investment and create jobs in the US. Giving a dividend so that the shareholders can buy a new Lexus or buy a few more shares of AAPL in their IRA doesn't do anything to accomplish those objectives. Rather, the intent of the tax holiday is for the money to be put into R&D, manufacturing, and other things that create jobs.

Quote:
Originally Posted by DESuserIGN View Post

Why tax inefficient? It's a tax holiday. Anything they pay in dividends would not be taxed. It would allow Apple to repatriate cash that would otherwise be taxed at around 30%, distribute it to the owners, stimulate the US economy instead of just being used, as many companies did last time, to move more jobs out of the US, and the money would still be taxed as dividends. As a shareholder I don't mind paying taxes (of course most of my portfolio is tax sheltered.)

It's a tax holiday only for the company. If they distribute dividends, the stock holders still have to pay taxes (even if it's in a tax sheltered account, you'll eventually pay taxes). If, OTOH, the money is reinvested in growing the company, the stock holder will get their return when they sell the stock - where it will be taxed at capital gains rates. As long as they hold the stock over a year, reinvesting the money creates far less taxes than distributing dividends.

Heck, even if they don't reinvest and simply put the money in the bank, it would increase the share price - which would again be preferable for the stock holder. It would not accomplish the other objectives (job creation), of course, but distributing dividends is probably the worst thing they could do with the money.

Quote:
Originally Posted by DESuserIGN View Post

Apple doesn't pay dividends? Odd I've received dividends from Apple many, many times (just not in the last 15 years or so.)

That's right - Apple last paid a dividend in 1995. And I suspect that shareholders are not disappointed in their return on investment during that period.

Dividends only make sense if you have nothing better to do with the money. Apple apparently thinks they have better things to do with it.
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post #36 of 46
Quote:
Originally Posted by anakin1992 View Post

taiwan has about 23million ppl while hong kong + macau have about 8millions. mainland has about 1.3billion.

let us say the top 1% of chinese have iPhone, so it would be 13million. the portion from taiwan/macau/hongkong would be around 1million max. so we can be pretty much sure that the number for the greater china is mainly for the mainland china and much contribution from these 3 areas will be a rounding error.

for fy11, apple made $13billion sale in china, including iPhone and macs etc. let us roughly round it up that $13billion are all for iPhone. and further if an iPhone is for $1000, thus there are about 13million chinese who are using iPhones.

You're assuming that the percentages are the same. But the average Hong Kong or Macau or Taiwan resident has a much higher income than the average mainland resident, so iPhone sales to those locations would be greater than the population ratio would suggest.

It doesn't change the fact that the majority are probably begin sold to mainland China, but let's at least try to be accurate.

(Also, I'm not sure that Taiwan sales are included in "China" sales. Most companies report them separately, but I haven't checked to see if Apple does).
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post #37 of 46
Quote:
Originally Posted by 2oh1 View Post

Because they're ignorant.

Yes, a heck of a lot of poor people live in China, but we're talking about a country with a population of over a billion.

As of 2009:
The U.S.: 307,006,550 people.
CHINA: 1,331,460,000 people, and growing at twice the rate that the U.S. is.

Yup, china needs to have a quarter of its population to be as prosperous as average american (very possible to achieve) and they are already just as powerful financially as the US.

They have a stable government, hardworking people and are doing way better than say india. I think investing in China is the smartest thing to do for the next 20 years and I'm glad apple is doing it.
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post #38 of 46
Quote:
Originally Posted by Sofabutt View Post

A few days ago there was a report about the price of a iPhone in China going for $1k US on the grey market. If the grey market is charging such a high price then how is it that regular Apple stores are doing do well?

There's some PR bullshit going on here...

When Apple first released the iPhone in China a few years back, sales were dismal, now we're supposed to believe China is the leading market for Apple? Complete BS.

That first iPhone had no WiFi. The next iPhone released in China was on a much smaller telco. There's many more details but may I suggest you research more about what's going on in China, you'll find answers to your questions. Not trying to sound like a smartass, but I'm also reading and learning more about China each day.

Bottom line is, the gray market and even 10 more official Apple Stores will continue to do very well in China in the next five years, assuming no unforeseen catastrophic global financial events.
post #39 of 46
The problem is that (Mainland) China is expanding so quickly keeping up is hard.

China has over 160 cities with a population of over 1 million people
Half the mobile phones made are sold in China
Chinese consumerism is just mindblowing. Over the last 5 years I've witnessed a consumer boom that is staggering. You have to see it to believe it.
Oh and for those that may have missed it China is the most powerful economic nation. They have the money that was spent over the last 20 years. They are rich beyond any countries dreams and are not so slowly buying up all they can in the West.
post #40 of 46
Does anyone have any info on Apple's India strategy? e.g. What is the current status, challenges, and plan going forward

Not having the facts, I would assume India would 30-40% the size of the opportunity in China. But I never hear Apple talk about it

Thanks

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