Decline in iPhone sales fueled by intense market competition in China, asserts Apple CEO
Apple, the tech giant, has reported its financial results for the first quarter of 2023, revealing a mixed bag of results. The company's revenue declined by 4.3% to USD 90.75 billion, marking a setback compared to the previous year.
In the premium smartphone segment, the company faced a 10.5% year-on-year drop in iPhone sales, amounting to USD 46 billion. This decline was particularly noticeable in Greater China, a major growth engine for Apple, where revenue dropped by 8.1% to USD 16.4 billion. Huawei's comeback in China directly impacted iPhone sales, causing a 19.1% year-on-year decline in the region.
However, Apple's focus on India as an 'incredibly exciting market' seems to be paying off. The company grew 'strong double digits' in India and set a new March-quarter revenue record in the country. Tim Cook, Apple's CEO, expressed optimism about the opportunity in India and hinted at the possibility of manufacturing in the country.
The rest of the Asia Pacific region, excluding India, logged the largest year-on-year revenue decline among Apple's regions, with a 17.2% drop to USD 6.7 billion. Japan registered an even steeper sales drop of 12.7% to USD 6.3 billion during the quarter.
In a positive note, Apple announced its biggest share repurchase plan to date on May 2, authorized at USD 110 billion. The stock buyback plan sent Apple shares up nearly 7% in extended trading on that day.
CFO Luca Maestri also raised Apple's quarterly dividend for the twelfth year in a row. Tim Cook expressed optimism about Apple's opportunity and generative ai, stating that significant investments are being made and exciting things will be shared with customers soon. The company hinted at new launches of products powered by ai during the earnings call.
Apple's supplier base in China is undergoing changes. The total number of Apple suppliers in China increased to 52 in 2023, up from 48 the year before. The company's largest supplier base in China for 2023 includes Pegatron and Foxconn, with Foxconn maintaining a significant presence in iPhone production. However, Apple is expanding iPhone manufacturing predominantly in India through companies like the Tata Group, which acquired Pegatron and Wistron factories in India by the end of 2023.
During his visit to Indonesia and Vietnam in April, Tim Cook mentioned that Apple will 'look at' the possibility of manufacturing in Indonesia. The company set an all-time revenue record in Indonesia during the quarter. There are now 286 manufacturing or development facilities in China, 10 more than the previous year.
Despite the headwinds in Greater China, China remains the biggest market in Asia for Apple. Tim Cook had a 'great visit' to China earlier this year, and the reception for Apple's new Shanghai retail store was 'very warm.' Apple is deepening ties there while expanding production in Southeast Asia and India.
