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A Look at Apple China

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Chinese revenue increases 11%

As China is the world’s second-largest economy and largest smartphone market, Apple’s (AAPL) performance in the country is of great interest to many investors. While discussing its fiscal 1Q18 (December quarter) results, Apple executives talked a great deal about the company’s Chinese business, highlighting progress in the country.

In 1Q18, Apple recorded double-digit growth in China for the second quarter in a row. The company’s Greater China revenue (Hong Kong included) grew 11% YoY (year-over-year) to about $18 billion, making it Apple’s third-largest market by geography.

As Apple had fewer weeks of business in 1Q18 than in 1Q17, its Chinese revenue could have been higher. Whereas Apple’s China revenue rose 12% YoY in 4Q17, it fell 12% YoY in 1Q17.

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New Apple customers in China

In addition to the iPhone, Apple also sells services and other devices in China, such as iPads and Mac computers. In fiscal 1Q18, more than 70% of Apple’s iPad sales in China were to people who had never purchased an iPad before, and almost 90% of Mac sales in China were to people who had never purchased a Mac.

The high sales to new customers seem to suggest a revival of interest in Apple products in China, which could be leading to Apple winning tablet and personal computer customers from rivals Samsung (SSNLF) and Xiaomi.

Apple taps into Alibaba network

Apple recently moved to tap into Alibaba’s (BABA) vast China presence by agreeing to accept Alipay payments at its physical stores in China, Reuters reported. Alibaba is China’s largest e-commerce company, while its Alipay is the country’s leading mobile payment platform. Alipay is run by Alibaba affiliate Ant Financial, which unsuccessfully tried to acquire MoneyGram (MGI) last year despite beating Euronet’s (EEFT) rival bid. Apple is also building more data centers in China, which could bolster its services business in the country.

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