Despite the fact Apple’s revenue from the country has dropped in the first quarter, Apple CEO sees great potential in the market. During his interview with Jim Cramer on CNBC, Cook said the middle class in China expected to grow from 50 million people today to 500 million in five years. He said it was a mistake Apple didn’t mention the fact in its recent earnings call, and that he”could not be more optimistic about China.”
It was a reaction to last month’s report that the number of company’s smartphones sold worldwide has fallen by 16 percent in the second fiscal quarter. And it is a 26 percent decline in the greater China (11 percent in mainland China).
Tim Cook wanted to give a positive message while some experts are voicing their concerns. Neil Mawston, the executive director at Strategy Analytics, thinks it is time Apple will face fatigue from iPhone, and the company is in need of innovation.
Apple had Abnormally High Upgrade Rate
Last year’s success with iPhone 6 may be a cause of a lesser revenue as people are upgrading at a lower rate. According to Cook, Apple had “abnormally high upgrade rate” last year, when people were buying iPhone 6. So that is one factor, among with ”currency rates and macroeconomics, etc”, he added. On the bright side, there are more people switching from Android to iOS.
As the company’s new 4-inch iPhone SE is doing well, the switching rate in China is 40% higher than last year. Now the company hopes to resolve with Chinese government and businesses the issue with its online book and movie services. People don’t stop its relationship with Apple after buying a device, as they continue purchasing music, apps, etc. This might be a huge factor, as today, it is the second largest revenue source for the company.