Apple sales revenue fell billions in China, wiping out other gains

Apple pinned the blame for its falling sales revenue primarily on issues in China, and now its quarterly earnings release shows just how much its sales in the region fell short. During its 2018 holiday quarter, Apple brought in $13.2 billion in Greater China, down from nearly $18 billion during the same period the prior year.

That nearly $5 billion dip was more than enough to wipe out small gains in the Americas and the rest of Asia Pacific. Sales revenue also fell slightly in Europe and Japan, which, combined, accounted for a $1 billion annual decline.

Apple saw sinking sales revenue in China across all of its leading products — iPhones, Macs, and iPads — and reduced foot traffic in its stores. Fewer people chose to upgrade their iPhones this year, too, Apple CEO Tim Cook said on a call with investors this afternoon. The company has also been having trouble getting Chinese approval to publish new games to the App Store, which “clearly is affecting our business,” said Apple CFO Luca Maestri.

The overall revenue decline was largely due to “economic deceleration,” caused in part by “rising trade tensions” with the US, Apple said earlier this month. Apple isn’t alone in making that claim. Nvidia just yesterday projected a revenue miss that it blamed in large part on China’s weakening economy. Analysts said China’s economy could be hurting Samsung, too.

While the revenue decline was far too big for Apple to ignore, the company is painting its business in China as generally well positioned for the future. Cook said that Apple’s wearable business in China is up more than 50 percent. The company’s active install base of users grew during the holiday quarter as well, with two-thirds of Macs and iPads being bought by first-time customers. Apple’s full-year revenue in China was also slightly up, Cook said.

While Apple hasn’t mentioned it, the company also faces increasingly stiff competition selling phones in China. Apple’s phone shipments continue to be outpaced by Huawei, Oppo, Vivo, and Xiaomi, all of which have been willing to sell phones more specifically designed for the market. In some cases, that’s by adding market-specific features like very high-resolution cameras; in others, it’s by offering phones at a variety of prices, including cheaper ones that Apple has long chosen to ignore.

Apple has started making some changes to appeal to the Chinese market, with its latest phones offering a dual SIM option — something popular outside the US. There’s even a special China-only model that supports two physical SIMs.

But the future of the company’s business in China — and elsewhere — as Tim Cook has hinted, is in its other business segments. The iPhone may be declining, but Apple still has its Watch, the HomePod, and an entire headphones business, Beats, that can sell products, and some of those sales seem to have grown. Apple is also more concerned with active users than ever, as it looks for new people it can sell services to, like its in-the-works TV and movie streaming service.