The Ups and Downs of Apple's China Business

Having gone from growth driver to problem child and back again before, Apple’s China business was one of the weaker spots in the company's stronger-than-expected holiday quarter. According to its latest earnings report, Apple's sales in the Greater China region, which includes mainland China, Taiwan and Hong Kong, declined 13 percent year-over-year in the last three months of 2023, while the iPhone maker recorded positive growth in all other geographic segments.

During last week's earnings call, Tim Cook tried to downplay the apparent weakness in Greater China, attributing the decline in sales at least partially to currency fluctuations and other non-operational factors. "If you look at iPhone in China Mainland, which I think has been the focus of a lot of interest and you look at it in constant currency, so more of an operational view, we were down mid-single digits on iPhone," Cook said, before pointing out that four of the six most popular smartphone models in urban China were iPhones. In fact, Apple climbed to the top of the Chinese smartphone market for the first time in 2023, capturing a record share of 17.3 percent of shipments in the world's largest smartphone market despite iPhone shipments declining 2.2 percent, according to IDC estimates. Total smartphone shipments in China declined 5 percent to 271 million units last year - the lowest in a decade - as weak consumer sentiment and a soft economic recovery weighed on the market.

As our chart illustrates, Apple's sales in Greater China have followed a cyclical pattern over the past decade, during which boom times have been followed by periods of lackluster growth.