Chinese market drives strong Apple results despite trade tensions

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An Apple store in Shanghai on March 26, 2019. (Image credit: TechNode/Shi Jiayi)

Apple shares rose 4.4% intraday on Wednesday after the company’s financial results for the third fiscal quarter beat Wall Street estimates thanks to a “marked improvement in greater China,” according to CEO Tim Cook.

Why it matters: China has been a problem market for the US firm as iPhone demand has waned amid strong competition from domestic challengers such as Huawei and Xiaomi. However, Apple’s measures to boost sales, including price cuts, have borne fruit.

  • iPhone sales in China fell nearly one-third in the first quarter of 2019 to 6.5 million units, marking the firm’s largest decline in two years, stated market research firm Canalys.
  • Apple cut the price of some models on Chinese e-commerce platform JD.com in January by up to RMB 800 ($116).

“I’d like to provide some color on our performance in greater China, where we saw significant improvement compared to the first half of fiscal 2019 and return to growth in constant currency.”

Tim Cook at Apple’s Q3 2019 earnings call on Tuesday.

Details: Apple’s revenue across greater China, which includes mainland China, Hong Kong, and Taiwan, fell 4% to $9.2 billion in the third fiscal quarter ended June 29, after declining 22% in the second.

  • Cook told CNBC that the reduction of value-added tax in China from 16% to 13% had been a big help, and he saw no signs of a boycott of Apple products in the country following US trade tensions.

Context: Apple’s smartphone shipments in China declined 14% after hitting 5.7 million units in the second quarter, according to Canalys.

  • Though smartphone shipments from Chinese competitors Oppo, Vivo and Xiaomi also tumbled, those of Huawei soared 31%. Analysts said the US-China trade tensions have made Huawei the “patriotic choice” in the country.
  • Chinese netizens had called for a boycott of Apple products after the US government put Huawei on a trade blacklist on May 16.