China passes US to become Apple's biggest iPhone market

Strong sales in the region during the Chinese New Year holiday pushed Apple to report higher smartphone sales than Wall Street anticipated.

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Employees at Apple's second store in Hangzhou, China, cheer as the location opens on April 24. Getty Images

China has officially passed the US as Apple's biggest iPhone market.

Fiscal second-quarter revenue in the region, which got a boost from the Chinese New Year in February, soared 70 percent to a record $16.8 billion from $9.84 billion a year ago. China was the only region detailed in Apple's earnings report where March sales topped those of the first quarter, though they rose a scant 4 percent. The region also surpassed Europe to become the second-biggest revenue generator overall after the Americas, which recorded $21.3 billion in sales.

Apple doesn't break out iPhone sales in individual regions but Apple CEO Cook noted Monday during a conference call with analysts that iPhone sales jumped more than 70 percent in Greater China during the period.

While Western markets such as the US tend to buy more devices for the holidays at the end of the calendar year, China tends to spend more around its New Year in February.

"It was an incredible quarter," Cook said during an earnings call with analysts. "I've never seen as many people coming into the middle class as they are in China, and that's the bulk of our sales, and we're really proud and continue to invest in the country."

As smartphones sales in developed markets slow, regions such as China become more important to handset vendors. China became the world's largest smartphone market in 2011 and now is home to almost 520 million smartphone users. Apple has been working to gain market share in the country by reaching deals with major carriers in the region. An agreement with the world's largest carrier, China Mobile, in January 2014 gave Apple access to more than 800 million subscribers.

Market research firm Kantar Worldpanel ComTech earlier this month said Apple had stolen the No. 1 spot in smartphone sales in urban China from local rival Xiaomi. For the three months that ended in February, Apple's iPhone 6 was the top selling phone in urban China with a market share of 10.2 percent, up from 9.5 percent for the prior three months. The iPhone 6 Plus was the third best-selling phone just behind Xiaomi's Android-based RedMi Note in second place. With the two new iPhones as well as older models selling robustly in China, Apple jumped to the top spot with 27.6 percent market share overall, Kantar said Wednesday.

China came close to passing the US as Apple's biggest iPhone market in the fiscal first quarter. The company generated $16.1 billion in revenue in Greater China in the period, up 70 percent from the same quarter a year ago. In mainland China, sales more than doubled from the previous year. Greater China -- which includes mainland China, Hong Kong and Taiwan -- represented 22 percent of Apple's total sales during the quarter ended December 27.

Analysts at Trefis last week noted that Apple's fiscal second quarter would "be all about China."

"We believe that iPhone sales in Greater China will be the biggest driver of quarterly earnings given the Chinese New Year shopping season that occurred in February, China Mobile's rapid 4G user additions and an improved supply-demand balance for the iPhone 6 and 6 Plus, both of which remained undersupplied over the previous quarter," they said last week.

In 2011, Apple made only $12.5 billion from China the entire year. The year before, it made only $2.8 billion. China's sales in the 2014 fiscal year totaled $29.8 billion.

Along with iPhone, second-quarter Mac, iPad and Apple Store sales also were strong in China. Mac unit sales jumped about 31 percent, Cook said during the earnings call, while the App Store more than doubled to a record quarter. iPad sales in Mainland China also posted their best quarter ever.

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