In 2019, sales of the iPhone dropped by 21% in China
makes as much money in China as Apple. While few make that much money at all, Apple raked in $44bn of revenues in Greater China during the 2019 financial year, mostly from selling iPhones. That is more than the global sales of United Airlines and Nike and about as much as Tencent, a domestic tech giant. Few countries have as much power as China to shape Apple’s fortunes.
The short-term threat to Apple’s business in China is best understood against the backdrop of the firm’s longer-term success. Apple’s Chinese fortune was built in the first half of the past decade, when its revenues in the country grew from $2.8bn in 2010 to $59bn in 2015. Sales have slipped in subsequent years , but were still sufficient for the Chinese market to account for 18% of Apple’s total revenues over the past ten years, second only to America.
Start with supply chains. Apple is deeply dependent on China’s high-tech manufacturing ecosystem. Only China offers the labour and infrastructure needed to manufacture hundreds of thousands of devices a day, the volume Apple must produce in the run up to the release of a new phone. During Apple’s China boom Foxconn, a Taiwanese contract manufacturer, was the driving force behind the building of a new factory town near Zhengzhou in Henan province, to support iPhone manufacture.
Sales of Apple’s core product, the iPhone, are also on the wane in China. According to Canalys, a research firm, iPhone sales in China dropped by 21% in 2019, to 27.5m, even after price cuts, a tactic that Apple rarely employs. Selling fewer phones means not only lost sales but also deprives Apple of future revenues. Sales of services, like app-store purchases and Apple Music, and wearables like AirPods and watches, designed to integrate with the device, are linked to iPhone sales.
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