Apple Has Plenty of Growth Drivers up Its Sleeve to Fuel 2016
Apple almost doubled its revenues from Greater China in the last quarter
Apple (AAPL) is unperturbed by China’s slowing economy. Apple’s revenues from Greater China, which includes Hong Kong and Taiwan (EWT), grew at an impressive year-over-year rate of 99% in the last quarter. Apple even plans to increase the number of stores in Greater China to 40 by the middle of next year, up from 25 in October this year. This clearly shows that Apple wants to keep investing in China.
China’s GDP (gross domestic product) grew at 6.9% year-over-year for the third quarter ended September 30, 2015. But the growth rate was down from 7.0% reported in the previous quarter. While this is still one of the highest growth rates within major economies, it’s a far cry from the double-digit growth China has seen. The below chart shows that this growth rate has continued to decline over the last few quarters.
China’s economy has slowed down in the last few quarters
China’s manufacturing sector has been shrinking over the last seven months, which is a cause for concern. More evidence of softening growth in China has led to a slump in commodity prices in the last few months, as China is a massive market for commodities.
Apple generated about 24% of its revenues from China in fiscal 2015, making it the second-biggest market after the US. If Apple continues to grow at a healthy rate in China, we could very well see China becoming the biggest market for Apple in the next couple of years. Not just Apple, many US technology companies depend to a large extent on China. Qualcomm (QCOM) derives about 50% of its revenues from China while Microsoft (MSFT) and IBM (IBM) have also emphasized the importance of maintaining good relations with China.
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