TMTPOST -- Apple Inc. CEO Tim Cook signaled iPhone sales may benefit from the renewed subsidy program launched by Chinese government after quarterly sales of the offering suffered its largest decline in a year.
Credit：Apple
“There is now a national subsidy program that launched on Jan. 20, on categories that some of our products are a part of. It’s a fiscal stimulus, kind of,” Cook told CNBC. He at an earnings call on Thursday also noted the stimulus as a macro tailwind for Apple. “There was a fiscal stimulus or subsidy announced in very recently in January that did not affect the December quarter,” said Cook.
Cook explained the latest subsidy program is different from those introduced by some provincial governments from October to December for the national program covers the categories that Apple has products in from smartphones to tablets and personal computers (PCs) and smartwatches up to a certain maximum price.
China earlier this month announced at a press conference a raft of measures to expand the scope of the consumer goods trade-in program to stimulate domestic demand and bolster economy this year. China expands the number of home appliance categories eligible for government subsidies from eight in 2024 to 12 in 2025, Zhao Chenxin, deputy head of the National Development and Reform Commission (NDRC) said on January 8.
Mobile phones, tablets, smart watches or wristbands for the first time were included in the category of digital products under the subsidy program. Consumers are able to enjoy subsidies of up to RMB500 (about US$70) apiece when purchasing digital products such as mobile phones priced below RMB6,000 per item. A broader range of passenger vehicles was also added to the subsidy program, according to a guideline unveiled by the NDRC and the Ministry of Finance.
Apple posted Thursday all-time quarterly records for total revenue and earnings per share (EPS). Revenue for the company’s first fiscal quarter ended December 28, 2024 climbed 4% year-over-year to $124.3 billion, beating Wall Street estimated $124.1 billion. EPS jumped 10% YoY to $2.40, also topping estimates. Service, Mac, iPad each recorded double-digit YoY rise in revenue for the quarter. But Apple’s core product iPhone missed expectation. IPhone sales edged down 0.8% YoY to $69.14 billion, whereas analysts projected $71.04 billion with an nearly 2% YoY increase.
What made investors more concerned is that revenue from Greater China sank 11% YoY to $18.51 billion, recording steepest decline since the quarter ended December 2023. That marks the YoY drop in Apple’s third largest region by revenue for six quarters in a row. Analysts had anticipated a reversal of the downward trend with revenue of $21.57 billion, representing a YoY increase of 3.6%.
Cook at an earnings conference admitted intense competition in China, describing it as “the most competitive market in the world.” He told analysts about half of the decline in revenue was driven by change in channel inventory, which resulted from misreading demand in the country. Channel refers to companies including wireless carries and retailers that sell Apple devices.
“My point was that our channel inventory reduced from the beginning of the quarter to the end of the quarter, and that was over half of the reduction in the reported results,” Cook said. “Part of the reason for that is that our sales were a bit higher than we forecasted them to be, toward the end of the quarter.” He added ended the December quarter “a little leaner” in inventory in China than the company had expected to.
Another key factor is absence of Apple Intelligence, Apple’s advanced personal artificial intelligence (AI) system introduced at the Worldwide Developers Conference (WWDC) in last June. The latest iPhone series feature the faster, more efficient A18 and A18 Pro chips, making these the most advanced and capable iPhone models ever.The AI features are deemed as a major selling point of iPhone 16.
Apple found the YoY performance on the iPhone 16 family in the markets that it had rolled out Apple intelligence was stronger than than markets it hadn't rolled out in, Cook said. Apple Intelligence are now available in U.S. and six other countries for English version, and Apple said it will release a simplified Chinese version in April. But it’s still unclear when Apple Intelligence can be available for users in China for Apple has to obtain regulatory approval for launch of the AI software.
Cook told CNBC Apple is going through the regulatory process in China and “nothing is certain” until it gets through the process. He confirmed Apple is looking for local partners to offer AI services since OpenAI’s ChatGPT and other Western AI models aren’t available in China.
“There are a number of Chinese companies that do have licenses to operate locally,” Cook said. “What we have to do is choose one and work with them on the integration, just like OpenAI.”
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