Apple CEO Cook Downplays Reports of Slowing China Economy
Amid reports of slowing in the China market, Apple is still bullish on the world’s largest population and its growing middle class, said CEO Tim Cook on an earnings call Tuesday. Referring to a McKinsey report on the expanding Chinese middle class, Cook cited “enormous change” that’s expected to produce a middle class totaling half a billion people by 2020.
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Cook said an economic slowdown in China​ isn’t apparent by the number of customers coming into Apple stores or perusing the website. Looking at Apple sales trends, “I wouldn't know if there was any economic issue at all in China,” he said, saying there’s “a misunderstanding” in the Western world about China’s economy, which contributes to the "confusion.” Cook conceded China isn’t growing as fast as it was but said Apple’s results there aren’t dependent on “minor changes in growth.”
Cook said iPhone 6 was the No. 1 selling smartphone in mainland China last quarter, and the 6 Plus came in third. Apple is “reasonably well positioned” in China, though Cook said he is “sure we can do better.” Revenue in greater China nearly doubled year over year to $12.5 billion, and Apple continues to invest heavily there, said Cook. The company opened its 25th store in greater China last week and is on track to have 40 stores by mid-2016, Cook said. The developer market in China is growing at a rate faster than in any other country, he said.
Worldwide, Apple in the past 12 months sold more than 300 million devices, including 231 million iPhones, 55 million iPads and 21 million Macs, said Cook. Some 48 million iPhones sold in the quarter, a 22 percent jump over the year-ago quarter, he said.
Apple predicts iPhone growth for Q1 based on the number of “switchers” from other platforms, notably Android. Some 30 percent of iPhone smartphone replacement purchases last quarter were from customers switching from an Android device, marking a new high point, and a “huge number,” since Apple began measuring that statistic three years ago, said Cook.
Responding to a question about upgrade rates, Cook said he feels good about the low number of Apple 6s and 6s Plus upgrades since the September launch, because that low number means 69 percent of users "haven't bothered to upgrade just yet.” Calling that an “opportunity,” Cook expects carrier upgrade plans to be the catalyst that will accelerate upgrades beginning a year from now. The carrier upgrade plans “act more like a subscription than they do like a purchase. And that's great for the customer because many of them want to upgrade on a frequent basis and they can do this very, very simply,” he said. The first-time buyer number is “surprisingly strong,” Cook said, which is important for expanding the ecosystem.
Revenue for the quarter was $51.5 billion, a 22 percent increase, driven by iPhone sales, expanded availability of Apple Watch, record Mac sales and revenue from services, said the company. Net income was $11.1 billion, it said. FY 2015 was Apple’s most successful year ever, with revenue growing 28 percent to nearly $234 billion, said the company.