Apple China Revenue Jumps 67% as Sales Outlets Double

Apple Inc. (AAPL) more than doubled its iPhone sales points in China, which helped boost revenue 67 percent in the world’s largest market for handsets.

Outlets in China selling the iPhone rose to 17,000 in the period that ended Dec. 29, from 7,000 a year earlier, Apple Chief Executive Officer Tim Cook said on a conference call yesterday. That helped Apple boost sales in the Greater China region to $6.83 billion, from $4.08 billion a year earlier, the company said in statement yesterday that marked the first time it formally broke out China data in its earnings release.

Cook needs a strong performance in China after Apple last quarter posted its slowest profit growth since 2003 and weakest sales gain in 14 quarters amid rising costs and accelerating competition with Samsung Electronics Co. (005930) Apple expanded its own China retail stores to 11 from six over the past year, while the number of premium resellers doubled to more than 400 shops, said Cook, who visited China this month.

“They are investing in distribution as a way to grow the market,” said Sandy Shen, a Gartner Inc. analyst in Shanghai. “They have well penetrated the tier-one and tier-two cities, so now they are looking to expand to the lower tier cities by partnering with distributors and retailers.”

Greater China iPhone sales more than doubled last quarter, Cook said. The region is the fastest growing for Apple at a rate that was more than double any other area, and the third largest market for Apple after the Americas and Europe.

The region, which includes Hong Kong and Taiwan with the rest of China, accounted for 13 percent of total sales compared with 8.8 percent a year earlier.

‘Great Progress’

“This isn’t nearly what we need, and it’s not the final by any means,” Cook said of the company’s China retail expansion on the call. “We’re not even close to that. I feel that we’re making great progress.”

Apple slipped to sixth place in China’s smartphone market in the third quarter of 2012, from fourth, as it struggled to lure consumers earning an average of $577 a month.

Samsung leads the China smartphone market in share, and four domestic suppliers also now outsell the iPhone in the nation, according to market researcher IDC.

Lenovo Group Ltd. (992), based in Beijing, took second place in China’s smartphone market during the third quarter, followed by three companies located in Shenzhen: China Wireless Technologies Ltd., ZTE Corp. (763) and Huawei Technologies Co. All four offer devices at a fraction of the iPhone’s cost, including the Coolpad 8060 by China Wireless that retails for 619 yuan, or just under $100.

‘Significant Contribution’

Apple, which posted total sales of $54.5 billion in the quarter, had previously included China as part of its Asia Pacific region in earnings statements.

“We have established a new operating segment of Greater China given the very significant contribution of that region to our overall business,” Peter Oppenheimer, Apple’s chief financial officer, said on the conference call yesterday.

Many of the iPhone sales outlets in China are through the nation’s second- and third-biggest operators: China Unicom (Hong Kong) Ltd. (762) and China Telecom Corp. (728) Apple has yet to adapt the handset for the 3G network of the nation’s largest carrier, China Mobile Ltd. (941)

To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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