From Apple's release of the company's revenue report we find out that China is driving Apple's growth. The fact is not surprising though. Most of the big corporations strive to conquer a share on the Chinese market.
After China posed as the world's manufacturer for a good while, the growth of its own middle-class transformed China in a huge consumer market. So, it is understandable why the biggest growth driver for Apple is not a single product but it's China itself.
If the fact is not shocking, the numbers certainly are. Apple's revenue in the fiscal third quarter in mainland China plus Taiwan and Hong Kong rose with an impressive 112%. After an increase of only 71%, this new number shows accelerated growth in China.
Tim Cook, Apple Chief Executive, declared that his company is looking towards China as their biggest market at a near point in the future. Today, Americas are the biggest Apple's market, with revenue of $20.2 billion.
For comparison, Apple's revenue in China was only $13.2 billion. But the times when China will become the biggest market for Apple are fast approaching, since Apple revenue in Americas grew with only 15%.
But Apple's growing reliance on the Chinese market comes also with a downside. This will expose Apple American corporation to concerns about China's economy. And the recent pullback in the Shanghai stock market has greatly exacerbated these concerns.
Timothy Acuri, Cowen & Co.'s analyst, downgraded on Wednesday Apple's stock to only a "market perform" level. The downgrade was in part caused by lower-than-expected iPhone sales due to mounting evidence of a widespread lowering in demand from Chinese markets.
Meanwhile, Cook declared that Apple remains firm in their bullish view about China's future. The American high-tech giant is still planning to increase to 40 the number of Apple stores in China by mid-2016.
On Tuesday, in an interview with Wall Street Journal, Cook said he thinks that the macro picture in China still looks great and events like the recent Shanghai stock pullback are just "minor thunderstorms now and then."
Cook explained his point of view by showing off the numbers. Penetration of LTE mobile networks in China is currently only at 12%, which suggest that the iPhone may take advantage in the future on wider availability of high-speed wireless connectivity.
McKinsey & Company, which data was cited by Cook, expects that by 2022 the Chinese upper middle class to account for 54% of all households compared to only 12% in the year 2012.
Cook is counting on a growing middle class in China. But even when their competitors stumbled, Apple has thrived in China. For instance, in the most recent quarter, Apple iPhone sales in China rose 87% while the broader smartphone market showed only 5% growth.
Cook explained that if iPhone sales were excluded from the overall Chinese market, the smartphone sales in the region would have been negative. He also mentioned that Mac sales in China rose 33%, when the overall PC market there experienced a 2% decline.
During the most recent quarter, Apple's App Store revenue in China doubled and six of Apple's top-ten stores are in the country. All these numbers explain Apple's optimism for their prospects in world's second-largest economy. As Cook put it, China provides "an incredible unprecedented level of opportunity there." And Apple will be there too.
