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Apple’s Q4 sales in China drop 29% YoY with iPhone 12 release delay

Written by Wency Chen Published on 

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Tim Cook expressed confidence in the Chinese market for the upcoming quarter, citing new iPhone models.

Apple (NASDAQ: AAPL) announced its fiscal fourth-quarter earnings on Thursday after the US stock market closed, posting USD 64.7 billion in net sales, versus an estimated USD 63.7 billion, inching up about 1% year-on-year (YoY) with all-time highs in its services and Mac divisions. However, sales in China stumbled 29% YoY, as its 5G-enabled iPhone 12 series was not released until the end of the quarter.

Apple’s growing services division, including offerings like Apple News, Apple TV+ and iCloud storage, generated USD 14.55 billion in the reported quarter ended on September 26, up 14% from the previous year’s quarter. Mac, iPad, and accessory product lines all maintained momentum, reporting a growth of 29% to USD 9.03 billion, 46% to USD 6.80 billion, and 21% to USD 7.88 billion, respectively, driven by products like a new iPad line, Apple Watch Series 6, and Apple Watch SE. Apple will also announce its first Silicon Mac in November.

Meanwhile, iPhone sales decreased significantly by 20% YoY to USD 26.44 billion. This is partly because the new iPhone 12 and iPhone 12 Pro were not included in the fourth-quarter results due to the postponed launch.

“Apple capped off a fiscal year defined by innovation in the face of adversity with a September quarter record, led by all-time records for Mac and Services,” said Tim Cook, Apple’s CEO, in the earnings call. “Despite the ongoing impacts of COVID-19, Apple is in the midst of our most prolific product introduction period ever, and the early response to all our new products, led by our first 5G-enabled iPhone lineup, has been tremendously positive,” he said.

Apple stock slid following the report, declining by 4.22% to USD 110.45 per share in after-hours trading.

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Notably, sales in China in the quarter dropped sharply by 29% YoY in Greater China, from USD 11.13 billion to USD 7.95 billion, which made up 12% of Apple’s total revenue. This was against the backdrop of declining domestic smartphone demand and increasing competition from Chinese brands. Sales of the iPhone in other reported regions, including the Americas, Europe, Japan, and the rest of the Asia Pacific region, all grew.

“A larger percentage of China revenue is made up of new iPhones. And so that’s the reason the number for the total quarter started with a minus sign,” Cook told CNBC after the earnings call. “But given what we see in the early going with the new iPhones, we’re confident we’ll grow in Q1.”

The release of the iPhone 12 lineup marked the Cupertino-headquartered giant’s official entry into China’s 5G handset battle. The iPhone 12 received a warm market response soon after its launch on October 14—preorders surpassed 150,000 units within three days—although Chinese netizens complained that Apple’s move to cut earphones and chargers in packages was “stingy.” The iPhone 12 Pro Max and iPhone 12 mini will be available for preorder on November 6 and start shipping a week later.

Chinese electronics powerhouse Huawei also launched the latest flagship model Mate 40 Series this month, featuring the in-house Kirin 9000 5G chipset. The company was again the top smartphone vendor in China, with a market share of 36.3% in the third quarter of 2020, while Apple took up 10.2%, per stats from research firm CINNO Research. Overall, shipments in China went down 19% YoY and 15% quarter-on-quarter (QoQ) to 79.5 million units.

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