Apple is becoming a tech company with Chinese characteristics. About 24 percent of the $51.5 billion of sales booked in its latest quarter – and two-thirds of revenue growth over the last year – came from China. Apple’s new iPhone installment plan could bump this up even further. Chief Executive Tim Cook’s bet on the Middle Kingdom is yielding impressive dividends, but carries existential political risks for the $675 billion company.
The iPhone now accounts for 63 percent of Apple sales, and a greater chunk of profit. Investors and observers will have to wait for next quarter to see exactly how well its newest wares are doing. They were only on the market for a slice of the quarter. But Apple’s figures do show its reliance on overseas sales, and in particular China. The company sold $12.5 billion worth of goods in the country, which is nearly double the amount it booked last year. Most of that demand was for its phones.
The number of iPhones it sells in China could grow over the next few years, thanks to a program Apple recently rolled out. Mobile operators in the United States and in some other markets have moved to selling phones through monthly installment plans. Apple has joined them. Customers pay over two years, but can upgrade after one year if they sign a new two-year contract and give their old phone back to Apple. Many of these devices will end up in China.
The country has long been a big market for refurbished phones. Around 40 million iPhones were already on China Mobile’s network before the operator agreed to sell them to users in 2013. Apple can now sell refurbished phones. They are perfect for China, which is a big market for cheaper smartphones.
That growing dependency is risky – just ask companies like Oracle, IBM and EMC, which have seen sales hit by the government’s efforts to wean the country off foreign technology. Apple knows this. In 2013, the company faced multiple attacks from Chinese media. Cook apologized for Apple’s “arrogant, inattentive” approach in the country. If China turns on Apple again, an apology may not be sufficient.