Apple’s rapid expansion in China
In the last part of this series, we discussed that China (FXI) has played a significant role in Apple’s growth. Last quarter, its growth was helped by the Chinese New Year on February 19, 2015. Greater China is now the second most valuable market for Apple. It surpassed Europe in the process. Now, Apple (AAPL) derives 29% of its revenue from Greater China. It’s only behind the US. The US contributed 37% toward Apple’s revenue, as the following chart shows.
Healthy growth is motivating Apple to expand its investments in China. Currently, it has 21 retail stores in Greater China. Apple plans to expand to 40 by the middle of next year.
Windows 8 performed poorly
Another important factor to consider while analyzing Apple’s success is the slowdown in Microsoft’s (MSFT) Windows PC sales. As we saw previously in this series, the last Windows update was Windows 8. It was met with little success. This is visible in its small market share compared to other Windows versions. Before Windows 8, Windows 7 was released on October 22, 2009. Since the launch of Windows 8, Windows PC sales have been falling. The low acceptance of Windows 8 and consequent loss of Microsoft’s market share provided an excellent opportunity for Apple to expand its market share.
When Microsoft Windows 8 was released in 4Q12, Apple commanded an 11.40% share of the US PC market, as reported by the IDC (International Data Corporation). A recent IDC report stated that Apple’s market share has risen to 13.50% per share—a rise of 2.10%. With the upcoming launch of Windows 10, Microsoft is focused on winning customers in the mobile space where Apple and Google (GOOG) (GOOGL) are leading players. It remains to be seen if Microsoft can get back to its glorious days or if it will allow Apple to take the lead.
If you’re bullish about Apple, you could invest in the Technology Select Sector SPDR ETF (XLK) and the PowerShares QQQ Trust, Series 1 ETF (QQQ). They have 16% and 13.50% weight in Apple, respectively.