Apple Surprised by Its Tremendous Growth in China
Apple Reports Strongest March Quarter Ever (Part 2 of 5)
China is now Apple’s second most valuable market
In the previous part of this series, we discussed how Apple (AAPL) was able to beat its own estimates of revenues and earnings per share. We also discussed how emerging markets played an important role in driving this growth for Apple. Within emerging markets, China (FXI) continues to be by far the most important growth market for Apple. In fiscal 2Q15, revenues from Greater China (China, Hong Kong, Macao, and Taiwan) grew at a YoY (year-over-year) rate of 71%.
This quarter for Apple was helped to a certain extent by the Chinese New Year, which occurred on February 19, 2015. Greater China is now the second most valuable market for Apple, overtaking Europe in the process. Apple now derives 29% of its revenues from Greater China and is only behind the US, which contributed 37% toward Apple’s revenues, as the chart below shows.
Apple sees strong growth across all its products in China
Apple continues to benefit from its partnership with China Mobile (CHL). China Mobile is the world’s largest telecom provider and serves more than 800 million subscribers. In fiscal 2Q15, iPhone unit sales grew by a YoY rate of 70% in China, meaning that iPhones have most likely gained share in China.
This finding is confirmed by a report from Kantar Worldpanel, which notes that Apple’s iOS share increased from 22% in December 2014 to 28% in February 2015. Meanwhile, the Google-based (GOOG) (GOOGL) Android’s share declined from 77% to 71% during the same period. The report also mentioned that Microsoft’s (MSFT) Windows, with a 0.8% share, and BlackBerry (BBRY), with a 0% share, continue to struggle in this market.
In addition to its iPhone sales, Apple’s other products had a strong quarter too. Mac sales were up 31% in China, and App Store revenue grew by a YoY rate of 100%. Strong growth is motivating Apple to increase its investments in China. It currently has 21 retail stores in Greater China, which Apple plans to grow to 40 by the middle of next year.
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