Apple Inc was able to contain a retreat in China's revenue in the September quarter due to the release-timing of the iPhone 11, but analysts said the company's good fortunes could be short-lived.
Apple said China's sales fell 2.4 percent in its fourth quarter ending Sept. 30, a far cry from the 27 percent fall it saw in the first half of this year-a reality Chief Executive Tim Cook highlighted on Wednesday's call for post-earnings.
This benefited a confluence of issues. The firm priced the iPhone 11's lowest version at $50 less than the last generation edition, even as it took a month from last year in the launch of the new models, which boosted revenue in the quarter of September.
It followed a year of heavy discounts on older iPhone models when Apple allowed resellers freedom to cut prices, as opposed to previous experience.
"The new low-price policy of Apple in China had an enormous impact," said James Yan, who at Counterpoint Research monitors China's smartphone market.
But the company is expected only next year to release a 5G-enabled handset, which analysts say is an issue because Huawei, China's largest smartphone manufacturer, released its first 5G device in June - the Mate 20 X, priced at 6,199 yuan.
Smaller phone vendors like Xiaomi quickly followed suit as Chinese state-owned operators were set to launch 5G networks on Friday, taking ultra-fast internet access to the masses effectively.
Yan expects these firms to flood the market in China next year with cheaper 5G phones, driving Apple's sales down.
According to market research firm Canalys, Huawei cornered the lion's share of the Chinese market in the July-September period, leaving Apple to the bottom of the pile.
Services sales- which the company claimed as a growth engine as a slowdown in iPhone volumes- grew by double digits in China as more iPhone users uploaded games to the app store after regulators began to allow games after a month-long ban.
In July-September, 291 domestic and imported games were licensed by the Chinese authorities for in-app purchases, pushing up common game downloads including the Fight Through The Heavens and the Pro Evolution Soccer through NetEase.
Nicole Peng, who at Canalys monitors China's smartphone industry, said the increase in Apple's income from subscriptions is also testament to the fact that Chinese consumers are becoming more accustomed to charging for online content.
Peng also stated that this year a trade-in offer for older models was advertised more prominently on Apple's China website and retail staff increased customer service.
Yet domestic resellers including Aihuishou, Huishoubao, and the used-goods platform Xianyu from Alibaba, have made customers who may have moved to cheaper Android phones realize that an iPhone's price can be balanced.
