China Passes U.S. To Become Apple's Fastest Growing Market


China Passes U.S. To Become Apple's Fastest Growing Market

Apple used to dislike questions about China, a politically sensitive example of a rare instance in which the company under-performed. Now that's all changed as Apple announced Tuesday that China has officially passed the U.S. as Apple's fastest growing iPhone market. It's revenues were still slightly behind the U.S. market however.

Fiscal second quarter revenue in the country, which got a boost from the Chinese New Year in February, soared 70 percent to a record $16.8 billion from $9.84 billion a year ago.

China was the sole region detailed in Apple's earnings report in which March sales topped those of the first quarter, though by a meager 4 percent. The country also surpassed Europe to become the second-biggest revenue generator overall after the Americas, which recorded $21.3 billion in sales.

Apple doesn't actually break out iPhone sales in individual regions but Apple CEO Cook noted Monday during a conference call that iPhone sales jumped more than 70 percent in Greater China during the period.

While markets such as the U.S. tend to buy more devices for the holidays at the end of the calendar year, China tends to spend more around its New Year in February.

"It was an incredible quarter," Cook said during the call with analysts. "I've never seen as many people coming into the middle class as they are in China, and that's the bulk of our sales, and we're really proud and continue to invest in the country."

But smartphones sales in developed markets slow and so regions such as China become more important to the company. China became the world's largest smartphone market in 2011 and now has almost 520 million smartphone users.

Apple has been working hard to gain market share in the country by reaching deals with major carriers in the region. It's been willing, unlike Google, to make rights and values concessions to the Chinese communist party. Google does little business in China due to human rights and freedom on expression abuses.

An agreement with the world's largest carrier, China Mobile, in January 2014 gave Apple access to more than 800 million subscribers though the cost to individual freedom remains to be seen.

China came close to passing the U.S. as Apple's biggest iPhone market in the first quarter. The company generated $16.1 billion in revenue in China in the period, up 70 percent from the same time a year ago. Mainland China sales more than doubled from the previous year.

Analysts at Trefis wrote last week that Apple's fiscal second quarter would "be all about China."

"We believe that iPhone sales in Greater China will be the biggest driver of quarterly earnings given the Chinese New Year shopping season that occurred in February, China Mobile's rapid 4G user additions and an improved supply-demand balance for the iPhone 6 and 6 Plus, both of which remained undersupplied over the previous quarter," they said last week.

In 2011 Apple made $12.5 billion from China the entire year. The year prior, it made only $2.8 billion. China's sales in the 2014 fiscal year totaled $29.8 billion.

Along with the iPhone, second-quarter Mac, iPad and Apple Store sales also were very strong in China. Mac sales jumped about 31 percent, the CEO said during the earnings call, while the App Store more than doubled to a record quarter.

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