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China drives Apple global sales, but challenges persist

By Liang Fei (Global Times)

07:57, April 27, 2012

Apple's China sales surged more than 300 percent to a historic high of $7.9 billion in the first quarter this year, which equals revenue of $87.77 million per day. But analysts yesterday said that despite the robust growth, Apple might need another blockbuster product to maintain its attraction to consumers.

China sales accounted for about 20 percent of Apple's $39.2 billion revenue in the fiscal quarter ended March 31, and the company's CEO Tim Cook has attributed the strong China growth to the better-than-expected sales of iPhone and iPad in the market. At present, sales in markets outside the US account for 64 percent of Apple's total sales.

Handset makers are eyeing the Chinese market as China grows into the biggest market for smartphones. Samsung, a major competitor of Apple, has developed more than a dozen handsets to compete in the high-end market.

Emerging markets, especially China, are of increasing importance to handset makers like Apple and Samsung, Ji Chendong, a senior IT consultant at KPMG China, told the Global Times.

Apple is expected to launch the 4G-enabled new version of iPhone this year. But Ji noted that simply upgrading its current products is not enough to attract consumers in the long term; Apple needs to find a new revolutionary product in order to sustain its robust growth.

Ji said that Apple's much-anticipated smart TV is likely to become the new product that can boost the company's growth, given that household entertainment is seen to have great growth potential.

But Wang Ying, an industry analyst with Analysys International, said that the Apple brand is still highly appealing among consumers and it is far from losing its attraction, especially in markets like China.

"The company's sales in China will continue to show strong growth due to its brand popularity among consumers, and the markets in second- and third-tier cities can be further explored as Apple's distribution channels proliferate," she said.

The company's China sales are very likely to double this year, with combined revenue in the first two fiscal quarters reaching $12.4 billion, close to the sales revenue of $13.3 billion in the fiscal 2011.

However, Apple has faced negative publicity in China, including worker suicides at its supplier Foxconn Technology, accusations of environmental pollution as well as copyright and trademark infringement, which according to Ji, has added uncertainties to the company's growth in China.

Apple's shares went up 9 percent after one week of slide to over $610 Wednesday following the results announcement. In the fiscal quarter ended March 31, Apple reported net income of $11.62 billion, up 94 percent year-on-year.

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