China, Japan spur 17% jump in iPhone sales

28 Apr 2014

After major concerns by a number of financial analysts leading up to its earnings announcement last week, Apple’s results for fiscal Q2 strongly beat expectations, sending its shares up 8% to $524.

The big surprise was iPhone sales surged by 6.3 million units, or 17%, to 43.7 million during the quarter. China and Japan both played a major part in driving Apple’s revenue to a new record. Despite a lack of new products over the last two quarters, its earnings rose 15% to $10.2 billion while revenue increased 4% year-on-year to $45.65 billion. Its gross margin rose to 39.3%.

iPhone sales in China were up 28% in the quarter. With the iPhone only offered officially since the beginning of the year and the country already representing Apple’s fastest growing market, China has a huge potential upside. The iPhone has a market share of just 7% in the mainland (2013 yearend), and China Mobile, with 780 million subscribers, is adding some 5.5 million new customers a month (with 75% of the roughly 1.3 million new 4G subscribers buying iPhones).

China Mobile sold an estimated one million iPhones in March, which is at about the same level as in February.

The iPhone, by contrast, has a 55% market share in Japan. March sales of iPhones in Japan were estimated at 4.3 million (which was up about two million units from the monthly average due mainly to a pending sales tax increase coming in June).

China now accounts for almost a quarter of the company’s total revenue after sales increased 13% to $9.8 billion while Japan posted 26% revenue growth. reported that 60% of first-time iPhone owners (both 4S and 5C) in China switched from Android models. “This fact appears to be antithetical to what we have heard about Apple consistently losing market share to Android phones and could portend more positive traction for the iPhone in China.”

The company’s launch of the lower-priced 4S did help it gain traction in China, which isn’t what was predicted by most analysts, who were concerned about brand erosion in a market with a high percentage of aspirational buyers.

The popularity of the 4S did cut the average selling price of the iPhone by $41 from the previous month – the largest drop ever.

Is Apple heading back to $600, or even higher, or has it peaked?

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