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Apple Posted Strong Growth in China despite Ranking Drop

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China revenue jumped

Apple’s (AAPL) revenue from Greater China increased 21% year-over-year to $13 billion in fiscal 2Q18 (calendar 1Q18), representing the best year-over-year growth in ten quarters. Apple recorded strong growth in China despite the fall in its smartphone vendor ranking in the country on the basis of units sold. According to research firm Canalys, Apple was displaced to the fifth largest smartphone vendor in China in 1Q18 from the fourth position it held in 4Q17 based on number of handsets shipped.

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Services business was huge growth driver

Apple CEO Tim Cook said that the iPhone did extremely well for the company to achieve 21% revenue growth in China, brushing aside recent concerns that Apple could be losing ground in China’s smartphone market. However, it was the services business and not the iPhone that drove growth for Apple in China. Apple’s services business includes App Store, Apple Music, and Apple Pay, a mobile payment service that is fighting for market share with Alibaba’s (BABA) Alipay and Tencent’s (TCEHY) WeChat in China. Alipay, which is run by Alibaba affiliate Ant Financial, currently dominates China’s mobile payment market, according to iResearch China.

US-China trade tension

While American technology companies like Google (GOOGL) and Facebook (FB) might not be affected that much by US-China trade wars because their core products are blocked in China, Apple is one of the American companies most vulnerable to escalating trade tensions between the US and China.

So far at least, Apple seems to have taken the US-China trade tensions in stride in 2Q18.

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