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.
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.
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
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
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.
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).
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?
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.
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.
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.
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.
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...
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.
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.
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
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
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.
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).
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.
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.
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.
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).
fair enough, let us say ppl from hong kong/macau/taiwan are 10 times more richer than mainlanders. so let us gave them 10% iphone adoption rate, then it would be 3million. if $1000 is per iphone, it would be 3B. it is a good number though. this will leave mainland number as 10million.
i don't have apple official report in hand to show that greater china region includes or does include taiwan. here is a new report on apple fy11 where indicates taiwan is part of it:
Comments
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.
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.
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.
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.
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.
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.
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).
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.
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.
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.
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.
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...
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.
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.
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.
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.
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.
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).
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.
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.
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.
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
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).
fair enough, let us say ppl from hong kong/macau/taiwan are 10 times more richer than mainlanders. so let us gave them 10% iphone adoption rate, then it would be 3million. if $1000 is per iphone, it would be 3B. it is a good number though. this will leave mainland number as 10million.
i don't have apple official report in hand to show that greater china region includes or does include taiwan. here is a new report on apple fy11 where indicates taiwan is part of it:
http://www.tuaw.com/2011/10/19/china...ortant-market/
we can get more clarification when fy11 report comes out later this month.