Apple less rosy with 1st sales dip in decade

An Apple Store in a Shenzhen mall. Sales have dwindled even in China, which has been one of Apple's most reliable strongholds.
An Apple Store in a Shenzhen mall. Sales have dwindled even in China, which has been one of Apple's most reliable strongholds.PHOTO: REUTERS

Company looks to India as cooling Chinese demand, global economic slump hit revenue

SAN FRANCISCO • Apple Inc's quarterly results had the usual glow of profits albeit a bit dimmer.

Despite a record net income of US$18.4 billion (S$26.3 billion) in the December quarter compared to a year earlier, iPhone sales rose less than 1 per cent in the same period, the slowest growth rate for the device since its launch in 2007.

And with chief executive Timothy Cook warning that "extreme conditions" in the global economy may affect sales, the company is looking at a first decline in sales in the March quarter.

As China sales appear to be cooling and other products such as the iPad (down for eight straight quarters) and Apple Watch (no sales figures provided) show no signs of filling the void, Apple may be turning to countries like India where rising wages and an expanding middle class may whet consumer appetite for the iPhones, Reuters reported.

Apple sales skyrocket during the holiday period, when new models of the iPhone often arrive and shiny new devices are purchased as holiday gifts. The US tech giant sold 74.8 million iPhones in the December 2015 quarter, recording a revenue of US$75.9 billion, the highest ever by the company.

But, it has also predicted that revenue for the second quarter, which for Apple is the first three months of this year, would come in between US$50 billion and US$53 billion. That is down from the US$58 billion in revenue it booked during the second quarter of last year.

"You need to take into account the business opportunities that we have but also the realities of an economic environment that is not ideal right now," said Ms Luca Maestri, Apple's chief financial officer. She noted that sales in Brazil, Canada, Japan and Russia are also being affected by global economic malaise.

Sales have dwindled even in China, which has been one of Apple's most reliable strongholds during its historic stretch of technology dominance. Apple's reliance on the country is now being put to the test.

On a conference call with analysts after its Tuesday earnings report, Mr Cook said the company is beginning to see "economic softness" in the region, particularly in Hong Kong, Bloomberg reported. China is no longer able to offset sluggishness elsewhere or counter the broader slowdown in the global smartphone market.

Analysts say iPhone sales could pick up during the second half of this year, when Apple launches new products, but with competitors such as Samsung and Huawei sharpening their edge, some suppliers are not so sure. "The pace of innovation has slowed. Apple is going towards the same direction as other brand names," a Taiwanese Apple supplier told Reuters.

Mr Cook, however, had a more optimistic tone, saying the company was "increasingly putting more energy" into India.

But with nearly 70 per cent of smartphones selling for less than US$150 in India, Apple's high-end phones remain out of reach of most consumers. The basic iPhone 6S sells at just under US$700 in India, or nearly half the average annual wage.

"In many ways, India is very similar to what China was a few years ago, but the middle class here is still very small and it can be two to three years before Apple gets a similar level of success in India," said Counterpoint Technology Research analyst Tarun Pathak.

A version of this article appeared in the print edition of The Straits Times on January 28, 2016, with the headline 'Apple less rosy with 1st sales dip in decade'. Print Edition | Subscribe