Apple's China Business Is Bouncing Back
Investors were fretting throughout 2016 about Apple's (NASDAQ: AAPL)business in China, which has stumbled amid intense competition from local smartphone vendors. In this segment fromIndustry Focus: Tech, Motley Fool analyst Dylan Lewis and contributor Evan Niu, CFA, discuss Apple's outlook in the Middle Kingdom.
A full transcript follows the video.
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Dylan Lewis: Another area that I think we should spend a little bit of time focusing on here issome of the international results,specifically China. I know that four out of Apple's fivegeographic operating segments set fresh highs -- all but Greater China. But, China is really seen asa huge market opportunity in addition to India, for Apple. Do you want to put a little color out as to what they said in the call?
Evan Niu:Yeah. Like youmentioned, more quarterly recordsin terms of all the other geographical segments, which, again,it's all these little things that are contributingto this overall overperformance. For example,Japan grew 20%. Japan is not a huge market for them,but just the fact that they can still put out meaningful growth numbers ...Europe was pretty much flat. But, Greater China, it has bounced back quite a bit sequentially. In the third quarter, sales were something like $8.7 [billion] to $9 billion. So, to really bounce back to $16 billion, it's shy of their all-time record, which was set a year or two ago, around $18 billion, but it is bouncing back on asequential basis. I think there are still lingering concernsabout the smartphone market in China,because it's getting really competitivewith all these low-cost Chinese vendorsreally proliferating and flooding the market with these cheap choices. You can see in their numbers that they've hadtrouble in the past year ascompetition intensifies on the ground. But I still think thatChina is a very big, promising business. It's probably going to be a tough place to compete. But it's a great market. They're still growing,they still have to expand the retail footprint. There's still room to run.
Lewis:Yeah. With lower-priced entrantscoming into the market, Apple's brand cachet is only going to give it so much pricing power. But, you have to think there's still some room to run there.
Dylan Lewis owns shares of Apple. Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool has a disclosure policy.