Author: Zhao Jinjie, Editor: Wang Jing, Header image from: Visual China
"The competitive environment there [in China] is one of the most competitive in the world. I've said it before, and that's still the case. ”
Cook's remarks were made in an explanation of the continued decline in revenue in Greater China in the new quarter. In the early morning of August 2, Beijing time, Apple released its financial report for the third quarter of fiscal year 2024 (that is, the second quarter of 2024) as of June 29, 2024, in which Greater China revenue was $14.7 billion, down 7% year-on-year, less than the $15.3 billion expected by analysts.
To make matters worse, in China, this is the fourth consecutive quarter of year-over-year revenue declines.
Expansion in emerging markets has slightly filled Apple's unfavorable position in China, such as the opening of its first store in Malaysia and record quarterly revenue in India, Indonesia, the Philippines and Thailand, which helped Apple achieve revenue of $85.8 billion in the second quarter, up 5% year-on-year, and net profit of $21.4 billion, up 8% year-on-year.
Outside of the Chinese market, another focus for Volkswagen is undoubtedly the upcoming Apple Intelligence. At the earnings conference, questions about Apple's intelligence were almost throughout.
Apple CEO Tim · Cook got straight to the point: "We look forward to sharing these AI tools with our users and will continue to invest heavily in innovation to enrich the lives of our customers." ”
On the eve of the earnings release, Apple made a preliminary appearance of some Apple smart experiences in the developer beta version of iOS 18.1, and the test features mainly revolve around Writing Tools, new Siri, photo albums, etc., as well as call recording that has finally arrived, and has not yet integrated ChatGPT features.
However, it is worth noting that in the developer beta update push of iOS 18.1, Apple specifically reminded that the early Apple smart phone needs to upgrade the phone to 15 Pro/ Pro Max, and it does not support the EU and China regions for the time being.
As for when it will open? Cook said Apple has worked very constructively with regulators in both regions, "Our goal is to move as quickly as possible, and we have to understand the regulatory requirements before we can commit to what to do and set a timeline accordingly." ”
Regarding the issue of the cooperation between Apple and OpenAI, which is of concern to the outside world, it has been rumored that the two sides are more of a resource replacement, and neither of them has charged authorization fees. Cook did not make a clear statement this time, saying only that "I don't want to go into the terms of the commercial agreement for the monetization model, because they are confidential for both parties." ”
However, Cook spoilers that Apple Smart will roll out an American English version to users starting in the fall, and ChatGPT will also be integrated into the iPhone by the end of the year. By next year, Apple Smart will roll out more features and expand to more languages and regions.
Under the wave of replacement demand that Apple Smart is expected to set off, Apple CFO Luca · Mestri gave a fairly optimistic financial outlook, and it is expected that total revenue in the third quarter will continue to maintain year-on-year growth, and the growth rate is expected to be similar to that in the second quarter.
One
In the second quarter, the iPhone, Apple's core hardware product, became one of the few businesses among the products with a year-on-year decline in revenue, with revenue of $39.3 billion, down 1% in the quarter. Another year-over-year decline in revenue was the wearables, home and accessories business, which posted revenue of $8.1 billion in the quarter, down 2% year-over-year.
In other products, Mac revenue was $7 billion, up 3% year-over-year. Service revenue was $24.2 billion, up 14% year-over-year. With the launch of the new iPad Pro and iPad Air, the iPad product line was the fastest-growing business in the quarter, with revenue of $7.2 billion, up 24% year-over-year.
Greater China became the only region where Apple's revenue fell year-on-year in the second quarter, with revenue of $14.7 billion, down 7% year-on-year. In other regions, Apple's revenue in the Americas was $37.7 billion, up 6% year-on-year; European revenue was $21.9 billion, up 8% year-on-year; Japan revenue was $5.1 billion, up 6% year-on-year; Revenue in the Rest of Asia Pacific was $6.4 billion, up 14% year-over-year.
This is the fourth consecutive quarter of revenue decline for Apple in the Chinese market. In the third quarter of last year, Apple's revenue in Greater China was $15.1 billion, down 2.6% year-on-year; In the fourth quarter of last year, Apple's revenue in Greater China was $20.8 billion, down 13% year-on-year; In the first quarter of this year, Apple's revenue in Greater China was $16.4 billion, down 8% year-on-year.
Along with the decline in revenue, iPhone sales in the Chinese market were also declined. Canalys data shows that in the second quarter of 2024, the smartphone market in Chinese mainland will achieve further recovery after experiencing the recovery inflection point in the previous quarter, with shipments increasing by 10% year-on-year to return to the level of 70 million units.
However, Apple bucked the trend, its market share fell by 2% year-on-year, ranking sixth, and there was a rare scene of domestic mobile phone manufacturers occupying the top five seats in the Chinese mainland market for the first time in history.
Zhong Xiaolei, a research analyst at Canalys, said, "In recent years, Chinese manufacturers have gradually achieved results in both software and hardware through the firm implementation of the high-end strategy and in-depth collaboration with local supply chain partners. ”
But Apple's smart is expected to inject new growth momentum into the iPhone. Wedbush analyst Dan · Ives predicts that starting with the iPhone 16, the Chinese market will grow again.
It has even been revealed by the media that Apple has raised the shipment expectation of the iPhone 16 series in 2024 to 90 million units, an increase of 10% compared with the iPhone 15 series in the same period.
The main driver of the upward revision is Apple's confidence in Apple Intelligence. After all, if you want to experience Apple Smart, there are certain requirements for the hardware of the mobile phone, that is, the memory must reach 8GB and above, which is why Apple Smart can only run on the iPhone 15 Pro/15 Pro Max at present. According to supply chain sources, the iPhone 16 series is expected to come standard with 8GB of RAM.
But how enthusiastic is Apple Smart about replacing the iPhone? Cook also did not give a very positive answer, saying only that "in terms of escalation rates, it is difficult to predict in the medium term." Suffice it to say that with Apple Intelligence, we're really excited about the level of value that we're going to provide to our users. This, we believe, provides another reason for a high-profile upgrade. ”
Despite the increased competition in the Chinese market, Cook remains confident in his long-term opportunities. "I don't know what the Chinese market will look like at every stage, but we are very confident in the long-term prospects."
Two
However, one fact that will slightly dampen Cook's confidence is that the iPhone 16 series released in the fall will not be able to experience Apple's smart for the time being.
According to Apple's phased push plan, only users in the United States will be the first to experience Apple's smart iPhone 16 this fall, and China will wait until next year.
In the face of the reality of the iPhone that continues to implement price reduction promotions, whether to buy first and enjoy first, or wait for Apple's smart push next year, and then buy the iPhone 16 at a more affordable price, will undoubtedly plague some Chinese replacement users.
Back in June, when Apple Intelligence debuted, Apple's senior vice president of software engineering, Craig · Federigi, said that Apple was trying to find ways to introduce "Apple Intelligence" into the Chinese market, "although there is no specific timeline at the moment, this is certainly what we want to do." ”
Referring to Samsung, one of its ways to bring AI large models into the Chinese market is to cooperate with Chinese manufacturers, and has successively connected to Baidu Wenxin large models and byte bean bag large models.
In March this year, when Cook visited China, there was also news that Apple was expected to reach a cooperation with Baidu to introduce the latter's Wenxin model into Apple devices such as the iPhone 16. So far, there has been no further information from the two sides.
To achieve the goal of making features available to everyone, Cook mentioned that Apple is moving as quickly as possible, "We have to understand the regulatory requirements before we can commit to doing so, and we have a timeline." But we have worked very constructively with regulators in both the EU and China. ”
The imperfection of Apple's intelligence is also one of the reasons that prevent Cook from rolling it out to more regions as soon as possible. According to some users' experience of the developer beta version of iOS 18.1, there is still a significant gap between the AI performance it demonstrates and ChatGPT, Gemini, etc.
Bloomberg technology reporter Mark · Gurman even broke the news that Apple Intelligence will jump to October, which means that the iPhone 16 unveiled in September will not be able to pre-install Apple Intelligence.
Gurman further explained that both Apple and developers need enough testing time to optimize Apple Intelligence. Even after the launch of Apple Intelligence in October, users will not be able to experience all the AI features outlined by Apple on WWDC, such as Siri, which has a full intelligent experience, may not be available until the first half of 2025.
This may be the reason why Cook did not forget to remind him at the earnings conference that he will "continue to invest heavily in AI technology and be committed to innovation to realize its full potential".
Three
In addition to lagging behind the Android camp in terms of AI models, Apple's pace of innovation is also attracting more and more skepticism.
After the release of Apple's second-quarter earnings report, Gurman commented that from a financial point of view, everything is fine with Apple. However, the pace of innovation at this company has not been as fast as it used to be, and it may have missed out on the latest major new products, while canceling out future sources of growth such as in-house screen technology and automobiles. I don't see any game-changing products in Apple's product roadmap for the next two or three years.
Cook has planned three major breakthrough areas for Apple's future - artificial intelligence, AR and autonomous driving.
In addition to the artificial intelligence that is catching up, the car project related to self-driving has been officially shut down by Apple.
At the end of February this year, Apple officially halted a car project that had been developed for 10 years and invested billions of dollars. Cars were once seen as Apple's most secretive and secretive project, and were even seen by Ming-Chi Kuo as a key weapon that could boost Apple's market value by $1 trillion.
However, in the face of the challenges of autonomous driving, Apple made a choice between two corners, and finally turned to AIGC, which is more urgent at the moment, to keep its core hardware iPhone.
The hybrid headset Vision Pro has also fallen into a slowdown in sales since its release in February. According to data from IDC, a market tracker, the sales of the Vision Pro have not exceeded 100,000 units in a quarter.
After going on sale in China and more countries and regions at the end of June, IDC expects that the total sales of Apple's Vision Pro in 2024 will not exceed 500,000 units.
Another folding screen field that has been vigorously cultivated by the Android camp, and Apple's new news has recently come out, and some media broke the news that Apple has completed the research and development of the folding screen iPhone internally, and is currently docking with suppliers to prepare for mass production, and product testing is already underway, and it is expected to be released in 2026 at the earliest.
In 2019, when Samsung's first folding screen phone, the Galaxy Fold, was released, there were rumors on the Internet that Apple was also preparing a folding iPhone internally. In the past five years, not only have many renderings of foldable iPhones been published on the Internet, but also a lot of patent information involving Apple's foldable products has been revealed.
Whether the rumored folding screen iPhone can be launched around 2026 will still be a new and questionable question.
Even if the folding screen iPhone is launched as scheduled, it will be a big test for Cook to prove to the outside world that Apple still has the ability to catch up.
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