updated 06:58 pm EST, Mon January 27, 2014
Growth of iPads strong; iPhone sales more dependent on LTE network expansion
China sales more than offset the one percent drop in iPhone revenue in the Americas, but CEO Tim Cook told investment analysts that the expected "tailwind" from China smartphone growth is likely to expand as the year progresses. Sales in "greater China" (which includes Taiwan and Hong Kong) were up nearly 30 percent year-over-year to $8.84 billion, with iPad sales up 64 percent year-over-year and iPhone sales up 24 percent year-over-year.
Cook pointed out to analysts that the long-awaited China Mobile deal, which should add significantly to Apple's bottom line in future quarter, was only in effect for "about a week" in the holiday quarter. Even so, iPhone sales saw a significant uptick in sales over the previous quarter as a result of the arrival of the iPhone 5s through two of China's three main carriers throughout the quarter, with China Mobile joining in at the tail end of the quarter.
China Mobile, the largest carrier in the world, has over 750 million subscribers. While the majority are still on "feature" type phones, with only around 180 million "smartphone" subscribers, the percentages there will change significantly in the years ahead as China's economy continues to grow. Securing a deal with China Mobile is expected to add around 18 million iPhones to Apple's normal China sales over the course of 2014.
Cook noted that iPhones are already responsible for 57 percent of all smartphone web browsing in China, suggesting that other brands aren't really being used as smartphones. He also cited a 96 percent customer satisfaction rating and 90 percent loyalty rate among China iPhone buyers. Sales of iPhones in China grew 24 percent percent from a year ago, he said, and inferred through a later remark that perhaps as much as five percent of that growth came from the one-week retail availability of iPhones on China Mobile in the quarter.
Surprisingly, Mac sales grew in China by 28 percent -- a growing "halo" effect that analysts appeared to overlook. Cook also noted, when speaking about the iPad in China, that sales on it were up 64 percent year-over-year -- three times as much as the overall tablet market in China, which saw only 21 percent growth in 2013.
In response to analyst questions, Cook said that he expects iPhone sales in China to continue growing, pointing out that in the current quarter the LTE network in China only reaches 16 cities -- but that is expected to grow to 300 cities by the end of 2014. "Last week was the best week for [iPhone] activations in China ever," Cook revealed, implying that the March quarter will see significant growth in iPhones in China, particularly being the first full quarter in which all three of the largest China carriers will be selling the iPhone.