Apple notches huge sales in China during Q1

The iPhone 6 and 6 Plus helped the company generate $16.2 billion, or 22 percent of its revenue, from China.

Shara Tibken Former managing editor
Shara Tibken was a managing editor at CNET News, overseeing a team covering tech policy, EU tech, mobile and the digital divide. She previously covered mobile as a senior reporter at CNET and also wrote for Dow Jones Newswires and The Wall Street Journal. Shara is a native Midwesterner who still prefers "pop" over "soda."
Shara Tibken
4 min read

Apple's iPhone 6 and 6 Plus have helped it gain huge traction in China. CNET
The iPhone 6's big screen has pushed Apple to big results in China, with quarterly sales in the region topping $10 billion for the first time.

Apple generated $16.1 billion in revenue in Greater China in the fiscal first quarter, up 70 percent from the same period a year ago. In mainland China alone, 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, and it was Apple's second-biggest iPhone market after the US.

"I was there right after the launch in October, and the excitement around the iPhone 6 and 6 Plus [was] absolutely phenomenal," Apple CEO Tim Cook said Tuesday during a call with analysts. "You can tell that we're a big believer in China."

The company plans to double its number of stores in Greater China to 40 by mid-2016, he added. Apple's traction in the region pushed the company to its biggest quarter ever. The company said Tuesday it sold 74.5 million iPhones in its fiscal first quarter, up 46 percent from its prior all-time high a year earlier.

The update follows a report from market research firm Canalys earlier Tuesday that said Apple became the biggest smartphone vendor by shipped units in China during the December quarter. Apple gained the title for the first time in its 38-year history, the firm said, surpassing Chinese vendor Xiaomi at No. 2 and South Korean giant Samsung at No. 3. Huawei nabbed the fourth-highest market share during the December quarter.

A year earlier, Apple held the No. 6 position in China, Canalys said, and its highest position in the previous seven quarters was No. 4 in the first calendar quarter of 2014.

The firm attributed Apple's position to the "incredible popularity" of the iPhone 6 and iPhone 6 Plus and said the market share gain was "an amazing result" given the retail price of the iPhone is much greater than that of phones made by Chinese vendors.

"While Chinese smartphone vendors are quickly gaining ground internationally, Apple has turned the tables on them in their home market," Canalys said.

Emerging markets represent a critical source of growth for everyone from giants such as Apple and Samsung to newcomers like Xiaomi. 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, proved challenging but was key as it provides access to more than 800 million subscribers.

Apple's China sales neared $10 billion only one other time before, in last year's fiscal second quarter ended March 29, the first period that incorporated sales from China Mobile. The deal between the two companies went into effect in January 2014. In 2011, Apple made only $12.5 billion from China the entire year. The year before, it made only $2.8 billion. Fiscal 2014's China sales totaled $29.8 billion.

The company generates more than half its revenue from its smartphone business, and the fiscal first quarter, which ends in December, is typically Apple's biggest quarter of the year because of holiday sales and the recent introduction of the latest iPhones.

This year's fiscal first quarter marked Apple's first full period of 4.7-inch iPhone 6 and 5.5-inch 6 Plus sales. The company said sales for the period ended December 27 jumped 30 percent to $74.6 billion, well above the $67.69 billion projected by Wall Street. (The last record quarter for sales was 2014's fiscal first quarter with revenue of $57.6 billion.) Apple said it sold more units at launch than any previous iPhone model.

Emerging markets used to be one of Samsung's strong points. The company has long battled Apple over pricey, high-end devices, but it dominated in lower-cost sectors where Apple doesn't play. Samsung largely gained its strong position in places like China by offering old, cheap smartphones. But it made a big miscalculation: consumers in emerging markets didn't want old, inferior technology. They wanted high-end devices with low-end prices. Xiaomi and other companies met that need, rapidly boosting their market share at Samsung's expense.

Samsung dominated the Chinese smartphone market for 10 straight quarters before Xiaomi knocked the Korean company out of its position. The shift started in the second quarter of 2014, according to Strategy Analytics.

Samsung didn't respond to a request for comment on the Canalys report.