Apple opened five new stores in China during the first quarter of this year, part of a plan to add 40 new retail locations across the country by 2016. It seems to have paid off. This quarter the revenue generated in China passed Europe to become Apple's second biggest market after The Americas. The company reported $16.823 billion in revenue for Greater China, up 71 percent year over year. It was also the only territory to show positive growth over last quarter's blowout numbers.
A rising middle class with a taste for goods that convey status has made China one of the most voracious consumers of new Apple products. "You can tell we are a big believer in China," CEO Tim Cook said on last quarter's earnings call. "It's an incredible market." On today's earnings call he said the company was likely to grow its market share in China by nine percent.
App store revenue grew over 100 percent in China compared to last year, said Cook. The company has paid developers there over five billion dollars, half of that in the last twelve months.
Many analysts had expected that iPhone sales would slow considerably after the December holiday season, but with the rise of China, there is a new element to the earnings cycle. According to Bloomberg "IPhone sales in greater China outpaced those in the U.S. for the first time, helped by the Chinese New Year celebration."
There had been speculation by many, including myself, that Apple would need to move downmarket with its iPhone to succeed in China. It seemed the company was headed in that direction with the iPhone 5C. As it turns out, Chinese consumers were more interested in high end iPhones with larger screens.
Apple's more expensive, higher-margin device continues to cannibalise the cheaper, lower-margin one.— Benedict Evans (@BenedictEvans) April 27, 2015