Apple CEO Tim Cook called China “the most competitive market in the world” as the tech company reported lackluster quarterly results on May 2 due to weakening demand in the world’s second largest economy and stiff competition from Huawei.
Apple revenue declined 4.3% on the year to USD 90.75 billion for the three months ended March 30. The company’s main revenue driver iPhone sales dropped 10.5% to USD 46 billion.
The sales decline was largely driven by the Asia region. Greater China—a main growth engine for Apple in recent years, covering the mainland, Hong Kong, and Taiwan—saw an 8.1% year-on-year revenue decline for the quarter, down to USD 16.4 billion.
“I maintain a great view of China in the long term,” Cook said on May 2’s earnings call. “I don’t know how each and every quarter goes, and each and every week, but over the long haul, I have a very positive viewpoint.”
The CEO said that he had a “great visit” to China earlier this year and that the reception for Apple’s new Shanghai retail store was “very warm.”
But Cook acknowledged ongoing challenges faced by Apple in China, including the competitive landscape.
According to Counterpoint Research, iPhone sales in China dropped 19.1% on the year for the January-to-March quarter as Huawei’s comeback directly impacted the premium smartphone segment in the country. Huawei’s sales rose 69.7% while overall smartphone sales in China grew 1.5% year-on-year in the quarter.
“The good news is help is on the way as we believe a pent-up demand cycle with an artificial intelligence-driven iPhone 16 model on the horizon should enable Apple to return to growth again in China with tailwinds into FY25,” said Dan Ives, managing director at Wedbush Securities, adding that Huawei’s 5G phone rollout and a lackluster iPhone 15 upgrade cycle have been a “black cloud” for Apple.
Japan registered an even steeper sales drop of 12.7% to USD 6.3 billion. The rest of the Asia Pacific region logged the largest year-on-year revenue decline among Apple’s regions in the quarter with a 17.2% drop to USD 6.7 billion.
However, Apple set an all-time revenue record in Indonesia during the quarter, Cook said during the earnings call, calling the Southeast Asian country “one of the many markets where we continue to see so much potential”.
Cook’s comments came after his visit to Indonesia and Vietnam in April, during which he told Indonesian President Joko “Jokowi” Widodo that the iPhone maker will “look at” the possibility of manufacturing in the country.
Apple also grew “strong double digits” and set a new March-quarter revenue record in India, Cook reported.
“I see it [India] as an incredibly exciting market, and it’s a major focus for us in terms of the operational side or supply chain side,” he said.
As China remains the biggest market in Asia despite the headwinds, the US tech giant is deepening ties there even as it further expands production in Southeast Asia and India.
A deep dive into Apple’s annual official supplier list shows the total number from China increased to 52 in 2023, up from 48 the year before, maintaining the country’s position as the largest source of suppliers for four straight years.
There are now 286 manufacturing or development facilities in China, 10 more than the previous year.
Despite the headwinds, Apple announced its biggest share repurchase plan to date on May 2.
“Given our confidence in Apple’s future and the value we see in our stock, our Board has authorized an additional USD 110 billion for share repurchases,” CFO Luca Maestri said in the earnings release. “We are also raising our quarterly dividend for the twelfth year in a row.”
The stock buyback plan sent Apple shares up nearly 7% in extended trading on May 2.
During the earnings call, the company also hinted at new launches of products powered by AI.
“We continue to feel very bullish about our opportunity and generative AI,” Cook said. “We are making significant investments and we’re looking forward to sharing some very exciting things with our customers soon.”
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.