Why Apple Is Optimistic about China
Apple's Optimism in 'Extreme Conditions': What's the Plan?
China remains a concern for many investors
China (FXI) has been experiencing slow growth in the last few quarters, and its manufacturing sector has been shrinking in the last few months. Since August 2015, China’s stock market has been volatile. It’s a source of concern for many investors and economies around the world.
China accounted for 24% of Apple’s (AAPL) revenues in fiscal 1Q16 and is now Apple’s second-largest market after the United States. Revenues from China increased 14% YoY (year-over-year) in fiscal 1Q16 and 17% YoY on a constant currency basis. It also rose by an impressive 47% QoQ (quarter-over-quarter) in fiscal 1Q16.
Apple’s chief executive officer Tim Cook stated, “Last summer while many companies were experiencing weakness in their China based results, we were seeing just the opposite with incredible momentum for iPhone, Mac and App Store in particular.”
Apple confident about China’s long-term potential
In January 2016, Apple experienced signs of economic softness in Greater China, particularly Hong Kong. Cook said, “Beyond the short-term volatility, we remain very confident about the long-term potential about the China market and the large opportunities ahead of us, and we are maintaining our investment plans.”
Other technology companies also depend on China to a large extent. Semiconductor giant Qualcomm (QCOM) derives 50% of its revenues from China. Microsoft (MSFT) and IBM (IBM) have repeatedly emphasized the importance of maintaining good relations with China.
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