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Apple didn’t score as many sales in China last quarter as it could have, and a regulatory delay is a primary culprit.
On Monday, the company reported results for its fiscal fourth quarter, which ran from July through September. Overall, Apple sold 39.3 million iPhones, up 16 percent from the year-ago period. Revenue for the period rose 12 percent year over year to $42.12 billion, a record for Apple’s fiscal fourth quarter. International sales accounted for 60 percent of that revenue.
However, China’s contribution to Apple’s total revenue growth slipped from a year ago.
For the quarter, Apple’s revenue for greater China inched up only 1 percent from the same period a year ago. Revenue for the quarter also dipped by 3 percent from the previous quarter to $5.78 billion, The Wall Street Journal reported Tuesday. Greater China is Apple’s third biggest market in the world behind the US and Europe, the Journal noted.
China has been a hefty cash cow for Apple. The company sold a record number of iPhone 5S handsets in the country in the October-through-December quarter in 2013. And 16 percent of Apple’s $37.4 billion in sales in this year’s April-through-June quarter came from China, which is the world’s largest smartphone market.
So what happened? Last year, China was among the countries that launched the iPhone 5S during the initial weekend starting September 20. This year, China didn’t start selling the iPhone 6 and 6 Plus until October 17, an entire month after its launch elsewhere and three weeks into Apple’s current quarter.
The problem stemmed from a delay in regulatory approval for the new iPhones by the Chinese government. The country’s Ministry of Industry and Information Technology had to approve the new iPhones for network access before retailers could start selling them. That approval stalled and didn’t come through until late September.
During a conference call with analysts on Monday to discuss last quarter’s earnings, Apple CEO Tim Cook addressed the issue with China. In explaining the sales factor, Cook noted the launch delay for the new smartphones in China. But he also attributed the sales disparity to another factor — namely inventory — and said that in one respect iPhone sales actually rose in China.
Last year, Apple significantly bumped up its channel inventory in China but this year scaled back.
“And so you have a compounded effect of no launch and a huge change in channel inventory in a year-over-year basis,” Cook said on the call. “And to share with you what it was in greater China, iPhone unit sell-through despite no launch in Q4 was up 32 percent year over year. The market was projected by IDC to only grow 13 percent. So we feel incredibly great about that.”
At this point, the full effects of iPhone 6 sales in China will be felt in the current quarter. A report from Chinese website Tencent claims that Chinese mobile carriers and Chinese e-commerce site Jingdong Mall were responsible for 20 million preorders of the iPhone 6 and iPhone 6 Plus in just three days. Even if those numbers aren’t accurate, Apple will see a hefty boost in iPhone 6 sales and overall revenue for the October-through-December quarter from the contribution of Chinese consumers.
Apple did not immediately respond to a request for comment.
