Apple’s revenues from China drop again, late iPhone 6 launch to blame

Apple has revealed its newest earnings report (for fiscal Q4 2014), showing disappointing drops in revenue from greater China, its third largest geographic segment.

Apple’s greater China revenues for the past quarter (July to September) fell to US$5.8 billion, down 2.7 percent from US$5.9 billion in fiscal Q3. Its newest number is alarmingly flat from a year ago, in fiscal Q4 2013, when it recorded US$5.7 billion.

The sequential drop is likely due to the delayed launch of the iPhone 6 and 6 Plus in China, which launched October 17 in mainland China rather than the first wave of launches on September 19. That means the mainland China tally for the iPhone 6 won’t be counted up until Apple’s next quarter.

Japan, however, got the new iPhone 6 models on day one, and so that area’s revenue saw a strong bump from the previous quarter.

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Here’s a chart showing Apple’s entire Asia revenues, using the company’s own geographic breakdown, dating back to FYQ1 2013. Note that greater China includes Taiwan and Hong Kong as well as mainland China.

While Apple’s revenues are flat in China, CEO Tim Cook said in the company’s earnings conference call (hat-tip to the Wall Street Journal’s call liveblog) that he’s still confident in its China performance. He brushed off suggestions that a big drop in on-contract subsidies by China’s three telcos would impact the iPhone by saying that only 20 percent of its phones sold in China are with a subsidy. (UPDATE: A reader points out that Cook attributed the greater China fall not only to a later launch, but also to a slightly decreased “channel inventory.” He explains by saying that if you look at “unit sell-through,” which is units shipped which are actually sold, then Apple’s greater China revenue was technically “up 32 percent year-on-year” in Q4. As a result of all that, Cook states that the “underlying results look different than the reported results.”)

Cook maintained that China’s strongly growing middle class means huge market potential for Apple. However, a number of local phone-makers, such as Xiaomi and Huawei, are pushing to make premium-feel phones that challenge the iPhone for as little as RMB 2,000 (US$325). The iPhone 6 starts at US$860 unlocked in mainland China.