Cook cool on China troubles: still 'a huge opportunity for Apple'

Posted:
in General Discussion edited January 2014
Apple Chief Executive Tim Cook is still upbeat on the his company's outlook in the world's most populous nation, saying that he isn't discouraged by this past quarter's somewhat disappointing numbers in China.



Apple did $4.64 billion in revenue in China in the recently completed quarter, down 43 percent sequentially and 14 percent year-over-year according to Apple's quarterly data sheet. This coming directly after what Cook called "our best China quarter ever."

Cook says investors shouldn't be concerned about the company's fortunes in that market, which recently passed the United States as the largest market for mobile devices.

"China was weaker in the quarter," Cook said during the iPhone maker's quarterly conference call. "The data sheet focuses on revenue, and it doesn't tell the complete story. If you look at sell-through, the sell-through in China was only down four percent from the year-ago quarter when normalized for channel inventory."

"Mainland China was up five percent year over year," Cook continued. "That's a lower growth rate than we've been seeing, and I attribute that to many things."

Cook made reference to economic troubles in China, which has seen its typically blazing growth rate hobbled by market forces, as well as the impact of a still soft global economy.

"The economy there clearly doesn't help us and others," the Apple CEO said.

Cook pointed to positive indicators in the world's most populous country as a sign that the just-finished quarter should not be taken as an ill omen. Apple's revenues in greater China represented about 14 percent of the company's revenue for the quarter. Over the last 12 months, the company has done $27 billion in revenue.

Additionally, iPad sell-throughs in greater china were up eight percent. In mainland China, Cook said, sell-throughs were up 37 percent. Apple's bestselling tablet also occupies a prime spot in China, with a higher than 50 percent share according to Cook.

Those sell-through figures are likely due to Apple's greatly increased efforts to market its products in China. Those efforts include installment plans for some Apple devices, as well as bigger pushes on the iPhone 4S and iPhone 4, both of which are priced closer to the affordable range for the average Chinese consumer. Apple has seen some success with those efforts, with the iPad mini debuting to "insatiable demand" and stock-outs last year.

Cook also pointed to the growing community of Chinese iOS developers as a positive indicator.

"We now have about half a million developers in China working on iOS apps," Cook said. That's up over 70 percent year-over-year."

Going forward, Apple won't be letting up in China any time soon. The company has plans to double the number of retail stores to 16 over the next two years, according to Cook, who ended his comments on the market in an optimistic fashion.

"I continue believe," Cook said, "in the arc of time that China is a huge opportunity for Apple. I don't get discouraged over a 90-day cycle that could have economic factors."
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Comments

  • Reply 1 of 23
    jakebjakeb Posts: 557member
    Must have been really hard for him not to mention China Mobile compatibility of the new iPhone.

    I have no idea how they never seem to slip up and accidentally let on that a future product exists.
  • Reply 2 of 23
    SpamSandwichSpamSandwich Posts: 30,558member
    Let's see what happens next quarter. There are a lot of moving parts that are having trouble meshing at this time, plus we're about to see iOS 7 and the next iPhone introduced.
  • Reply 3 of 23
    joshajosha Posts: 901member


    Could it be that China sees as Apple too powerful, so is putting up blocks against Apple's sales increase ?

     

  • Reply 4 of 23
    flaneurflaneur Posts: 4,494member
    jakeb wrote: »
    Must have been really hard for him not to mention China Mobile compatibility of the new iPhone.

    I have no idea how they never seem to slip up and accidentally let on that a future product exists.

    Absolutely the coolest heads I have ever heard talk. But still pleasant about it. They joke about not being able to say anything.
  • Reply 5 of 23
    anantksundaramanantksundaram Posts: 18,871member


    Get the damn China Mobile deal done already.


     


    Or start moving production. Use your chips, Tim.

  • Reply 6 of 23
    anantksundaramanantksundaram Posts: 18,871member

    Quote:

    Originally Posted by JoshA View Post


    Could it be that China sees as Apple too powerful, so is putting up blocks against Apple's sales increase ?

     



    I doubt it. In many more tangible ways, Foxconn -- a Taiwanese company -- is more powerful than Apple in China, and yet, seem to be doing fine there.

  • Reply 7 of 23
    ankleskaterankleskater Posts: 1,287member

    Quote:

    Originally Posted by SpamSandwich View Post



    Let's see what happens next quarter. There are a lot of moving parts that are having trouble meshing at this time, plus we're about to see iOS 7 and the next iPhone introduced.


    Not clear to me how iOS7, a new iPhone will necessarily win over more Chinese customers. Not saying they won't, but just don't see how/why/what.

  • Reply 8 of 23
    pendergastpendergast Posts: 1,358member
    Not clear to me how iOS7, a new iPhone will necessarily win over more Chinese customers. Not saying they won't, but just don't see how/why/what.

    I thought it's been discussed that iOS 7's "ugly" color scheme is likely to appeal in Asian markets.
  • Reply 9 of 23
    iqatedoiqatedo Posts: 1,593member


    Since China started opening up in the 1970s to the involvement in China of foreign manufacturers, doing business there has always been, from a Chinese perspective, about technology transfer. Perception in government of the degree to which a particular corporation cooperates will have a bearing on that corporation's success in the country.

  • Reply 10 of 23
    ankleskaterankleskater Posts: 1,287member

    Quote:

    Originally Posted by IQatEdo View Post


    Since China started opening up in the 1970s to the involvement in China of foreign manufacturers, doing business there has always been, from a Chinese perspective, about technology transfer. Perception in government of the degree to which a particular corporation cooperates will have a bearing on that corporation's success in the country.



    "Technology" transfer - so that's what it's called these days. How many $technology transfers are needed for China Mobile to agree to terms with Apple?

  • Reply 11 of 23

    Quote:

    Originally Posted by anantksundaram View Post


    Get the damn China Mobile deal done already.


     


    Or start moving production. Use your chips, Tim.



    Brilliant! My dad (English CEO) always said the Chinese are "implacable." but by no means stupid. Apple just needs to negotiate better and not believe anything they say! :)

  • Reply 12 of 23
    poochpooch Posts: 768member
    "I continue believe," Cook said [...]

    did he really say that? or did you just get sloppy, lazy, and tired cutting and pasting from some other article, probably cnet's?
  • Reply 13 of 23
    doxxicdoxxic Posts: 100member


    "We now have about half a million developers in China working on iOS apps," Cook said. That's up over 70 percent year-over-year."


     


    Up until now I had totally overlooked the importance of this.


     


    A trustworthy developer ecosystem seems to be even more distinguishing in China than it is in the West.

  • Reply 14 of 23
    ifij775ifij775 Posts: 470member
    There is nothing in the earnings report or conference call that would excite an investor to buy.
  • Reply 15 of 23
    tallest skiltallest skil Posts: 43,399member
    ifij775 wrote: »
    There is nothing in the earnings report or conference call that would excite an investor to buy.

    Sure there isn't¡
  • Reply 16 of 23
    philboogiephilboogie Posts: 7,435member
    ifij775 wrote: »
    There is nothing in the earnings report or conference call that would excite an investor to buy.

    700
  • Reply 17 of 23
    pmzpmz Posts: 3,433member
    Not clear to me how iOS7, a new iPhone will necessarily win over more Chinese customers. Not saying they won't, but just don't see how/why/what.

    You're new around here, aren't you.
  • Reply 18 of 23


    China's economy is apparently completely lopsided towards investment vs. consumption. Their consumer economy is functionally only a bit larger than Japan's.

  • Reply 19 of 23
    herbapouherbapou Posts: 2,214member

    Quote:

    Originally Posted by ankleskater View Post


    Not clear to me how iOS7, a new iPhone will necessarily win over more Chinese customers. Not saying they won't, but just don't see how/why/what.



     


    They need a NEW lower cost iphone, its that simple. And not just for China. Getting China mobile will help, but the high end phone will quickly saturated. I like the rumor about Apple doing the same thing with the ipad mini.


     


    IF  they can come up with good margins on a $350 phone and $200 tablet they have what it takes for emerging markets. For them, those products will be high end. For rich countries, those would be perfect unlock choices.

  • Reply 20 of 23
    SpamSandwichSpamSandwich Posts: 30,558member
    Brilliant! My dad (English CEO) always said the Chinese are "implacable." but by no means stupid. Apple just needs to negotiate better and not believe anything they say! :)

    "What is “different” about China is that Chinese negotiators do not feel constrained by the rules of good faith negotiation. Thus, when a Chinese company argues that “China is different,” what they really mean is that the fair and impartial laws of China do not reflect the reality of China. The reality is that the Chinese side must take advantage of the foreign side. This means that the foreign side must accede to the unreasonable request of the Chinese side. If the foreign side does not concede to patently unreasonable terms, then no deal can be made."

    "It is common in negotiating China Joint Ventures for the Chinese side to insist that the intellectual property contributed to the JV by the foreign partner must ultimately be transferred to the Chinese JV partner. The same is true in many technology license agreements where the Chinese side will say: “sorry, but you cannot protect your IP. You must transfer everything to us at the end of the license.” This situation is obviously the opposite of what the foreign side wants from the transaction. When the foreign side resists, the Chinese side will then play the “never never land” card and state that Chinese law requires such a transfer. In fact, however, Chinese law does not make any such requirement. This is simply what the Chinese side wants out of the deal. Of course, the Chinese government supports the Chinese side, since the free transfer of technology arguably benefits China, so everyone in China is on the same side. Thus government authorities involved will usually do nothing to clarify the situation."

    http://www.chinalawblog.com/2012/10/how-to-handle-chinese-negotiating-tactics-part-three.html
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