Apple’s Once-Sunny China Future Looks Hazy

(Bloomberg Opinion) -- China was supposed to be crucial to Apple Inc.’s future. A tech-savvy audience, impressive mobile infrastructure and growing wealth had executives and investors believing the world’s most populous country would drive growth.

So far, the data indicate otherwise.

The Greater China region — which comprises China, Hong Kong and Taiwan — just posted yet another period of underperformance, contributing little to the iPhone maker’s blowout December quarter.

Only Japan posted worse growth in that three-month period, and that’s because the country had just changed regulations on mobile phone contracts that caused what’s likely to be a short-term slump in demand.

This poor performance in China is not a one-off; it’s a trend.

While the Americas and Europe clearly got a bump from year-end holiday demand, a shopping season that largely doesn’t apply to China, trailing 12-month revenue shows continuing trouble. On that basis, the picture is even worse. While Apple’s Japan business suffered from that regulatory change, its position in Greater China has struggled at the hands of strong local competitors such as Huawei Technologies Co. and Xiaomi Corp.

Patriotism and the U.S.-China trade war serve to emphasize to many consumers that domestic offerings are as good as, or better, than what Apple provides. The iPhone was once a solid player in the market, but it now languishes around fifth with a single-digit share of the market.

Greater China used to contribute more than a quarter of Apple’s revenue. That figure has fallen closer to 16% on a trailing 12-month basis, the lowest level in more than six years.

It has been convenient to believe that a growing market like China would help Apple overcome a slowdown in mature markets and general smartphone upgrade apathy among consumers. But the latest numbers show the country has a long way to go to fulfill that promise.

To contact the author of this story: Tim Culpan at tculpan1@bloomberg.net

To contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.net

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.

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