China has been one of the biggest causes of Apple instability in recent times, particularly when it comes to trade tensions between China and the United States. Things may be starting to stabilize, however, as Tim Cook noted in Apple’s earnings call yesterday.
That’s good news when it comes to the country Cook has said is Apple’s future biggest customer.
Apple reported China net sales of $11.13 billion in its fiscal Q4 earnings. That’s a 2.4% decline over the previous quarter. While that doesn’t sound great, however, it’s a smaller drop than the 4.1% decline in the June quarter. That, in turn, is considerably less than the 21.5% decline in the March quarter. In other words, Apple’s China decline looks to be slowing down. Since uncertainty is a driver of shareholder trepidation, that’s a very real positive.
During the earnings call, Cook said that “trade tensions [are] less” in China than they have been recently. He also noted that products were being “extremely well received” in the country.
Things stabilize (and grow) in China
“I would also say, it’s not all about iPhone in China,” Cook continued. “The services area grew double digit. We began to see more gaming approvals in the quarter, or I should say some key gaming approvals. It’s not all about quantity, but about which ones. We saw that. Also wearables — wearables are doing so great at a company level. They’re doing even better in China. And so lots of positives there.”
In a note to clients, Wedbush analyst Dan Ives writes that:
“Importantly on the iPhone front, China came in well above our and Street expectations and is on the path to showing growth in the region which remains the focus of investors with this key region representing roughly 20% of all iPhone upgrades over the next 12 to 18 months.”
There are still plenty of unpredictable factors that could beset Apple in the country. Issues like the ongoing Hong Kong protests continue to cause headaches for U.S. companies that do business there. In addition, there are challenges to Apple’s privacy-first philosophy such as the insistence that Apple house Chinese iCloud data with local companies.
Still, this is overall good news for Apple. We’ll have to wait until the next quarter to see if the pattern holds true.