27th September 2023

Apple Inc.’s AAPL 6.98% newest report vacation quarter got here partly due to pleasure for the iPhone 13 in China, the place homegrown Huawei Applied sciences Co. has seen a decline in its market share following U.S. sanctions.

Higher China income rose 21% to a report $25.eight billion throughout the quarter ending in December, the Cupertino, Calif., tech big mentioned Thursday. That outpaced its general income development of 11% to $124 billion, its slowest year-over-year rise in additional than a yr.

“The merchandise are resonating,” Tim Cook dinner, chief govt, mentioned in an interview.

It’s a change of fortunes for Apple and Mr. Cook dinner who in January 2019 took the uncommon motion of slashing the corporate’s quarterly income forecast due to a downturn in iPhone gross sales in China.

On the time, the corporate had been dealing with competitors from Huawei’s choices that have been seen as more and more subtle whereas inexpensive. Apple’s place was made worse by an abrupt slowdown within the nation’s financial system largely attributed on the time to commerce tensions with the U.S.

Indicators of Apple’s improved China efficiency had been rising for the reason that iPhone 12 with 5G mobile connectivity made its debut in late 2020. They picked up tempo when the iPhone 13 lineup was launched in September. In the course of the iPhone 13’s debut in China, it rose to first place available in the market that preliminary week, in line with Counterpoint Analysis.

Sturdy gross sales within the ultimate three months of 2021 continued, permitting the corporate to seize the highest place within the nation, with 23% of the market in contrast with 16% a yr earlier.

In the meantime, Huawei, as soon as Apple’s largest rival in China for the premium smartphone market, fell to 7% of the market from 23%. U.S. sanctions have curbed Huawei’s means to purchase chips and use American software program, akin to Alphabet Inc.’s Android working system, decreasing its provide of telephones and prompting customers to ditch the model.

Prospects at a Huawei retailer in Shanghai final yr; the Chinese language firm has been harm by U.S. sanctions.

Picture: Qilai Shen/Bloomberg Information

Apple was final No. 1 in China throughout the ultimate three months of 2015, with its iPhone 6 mannequin lineup, which included the primary large-screen model of the cellphone, in line with Counterpoint. The iPhone 6 was launched in late 2014.

Equally, analysis agency Canalys figures Apple took the No. 1 spot within the ultimate three months of 2021 with unit shipments rising 40% from a yr earlier to 21.5 million smartphones in China. That development outpaced the general China market that gained 3% throughout the interval whereas rising simply 1% to 333 million models in 2021 in contrast with 2020. The market was nonetheless down greater than 10% from 2019’s pre-Covid-19-era shipments.

The pricing of the iPhone 13 lineup, which included higher processors and cameras than the iPhone 12, was greeted with shock in China when it was introduced. Shoppers flooded social media with constructive feedback about how the corporate had saved the value in keeping with the iPhone 12 fashions regardless of rising prices that had pushed up costs for different shopper items.

The iPhone benefited from an absence of high-end competitors amongst Android choices available in the market, Counterpoint analyst Ethan Qi mentioned. “There’s much less competitors from the Android camp for smartphones above $800 and a part of earlier Huawei smartphone customers had switched to iPhone,” he mentioned.

All of that benefited Apple. The corporate on Thursday mentioned the October-through-December interval noticed general revenue rise 20% to a report $34.6 billion. Apple gross sales in its residence market of the Americas rose 11% to $51.5 billion, remaining its largest area by gross sales.

iPhone 13 Mini and iPhone 13 get higher battery life and new digital camera methods. iPhone 13 Execs get brighter, quicker shows. Apple Watch grows a bigger display screen with Collection 7. And Apple revamps the iPad Mini. WSJ’s Joanna Stern highlights the autumn lineup. Picture illustration: Laura Kammermann. (Initially revealed in September)

Analyst Dan Ives of Wedbush has referred to as China development “the gasoline within the engine” for Apple.

The corporate doesn’t get away particular product strains by geographic area. But Mr. Cook dinner mentioned the China development is extra than simply iPhone, saying the enhancements are throughout its product strains and that Mac computer systems and wearables had report outcomes.

“So we’re increasing the variety of clients that we will speak to and promote to and so I couldn’t be extra bullish,” Mr. Cook dinner mentioned.

The success of the iPhone 13 in China is made extra outstanding by the truth that the lineup is so related in design to the iPhone 12 collection. The iPhone 12 lineup was closely marketed for its technological advances together with providing 5G mobile connectivity for the primary time.

International year-over-year iPhone gross sales within the December quarter rose 9% to $71.6 billion, beating Wall Avenue expectations for a 3% achieve, however that development was a lot slower than the features seen with the iPhone 12 lineup. Analysts challenge iPhone income will rise lower than 1% this fiscal yr in contrast with the previous yr, when gross sales rose 39% and helped gasoline Apple’s best yr ever.

Historically, gross sales of the iPhone fall off within the years after an enormous launch just like the iPhone 12. In fiscal 2015 and 2019, for instance, China income rose within the fiscal first quarters then fell off within the following quarters.

Within the interview, Mr. Cook dinner mentioned it’s tough to check previous iPhone cycles as a result of they’re all completely different, noting that the yr of the iPhone X solely had one high-end model whereas the iPhone 13 model has each Professional and Professional Max fashions.

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Write to Tim Higgins at Tim.Higgins@WSJ.com and Yang Jie at jie.yang@wsj.com

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