Apple upbeat on Asia despite ‘weak’ quarter

After announcing its first-ever drop in iPhone sales on Tuesday night, Apple sought to reassure investors by saying its latest and cheapest model was in strong demand after being launched in late March. Some retailers and suppliers in Asia aren’t so sure.

In a Reuters survey of 10 retailers in Hong Kong, Beijing, Shanghai, and Shenzhen, seven — including four Apple Stores — reported solid early demand, but three third-party retailers said sales were weak.

Two suppliers of components for Apple phones, including the new iPhone SE, said they were seeing lower orders.

Apple shares slid by 6.5% yesterday and the stock is now down 25% in the past year.

“I’ve been dealing with iPhones for five to six years now. This current quarter for Apple feels weak,” said an executive at a Taiwan-based company whose components are used in iPhones including the SE model, which markets in Ireland from €499 (pay as you go).

“Our current shipment situation for Apple is not like the last two years. There are more iPhone models, but the total volume of iPhones is falling.”

Such a mixed outlook from China, its most important market after the US and generator of a quarter of the company’s revenue, could be a major cause of concern for Apple.

The company’s revenue from the region, which includes Hong Kong and Taiwan, dropped 26% in the last quarter, making it the weakest region in the world.

“IPhone is still popular but sales have dropped because... there’s no new model and the SE is similar to 5C. So it doesn’t sell well,” said Zhu You Peng, a salesman at Apple product reseller Xiongyu in Shenzhen.

The 5C was Apple’s last attempt to produce a cheaper phone, back in 2013.

Zhu said it sold around 300 iPhones per month last year but the number has dropped to around 100-200 this year.

That view contrasts with upbeat comments about the phone from Apple’s chief financial officer Luca Maestri on Tuesday.

“The situation right now around the world is that we are supply-constrained,” he told Reuters, referring to the iPhone SE. “The demand has been very, very strong.”

The iPhone SEs are sold out in Apple’s own stores in mainland China and customers have to wait about three weeks to get the product delivered by Apple. The size of the original supplies to the stores is unclear.

Apple, whose shares dropped about 8% after it reported the disappointing first-quarter results on Tuesday, is under pressure to show that the decline in iPhone sales represents just a hiccup.

It isn’t the only challenge facing the technology giant. Its mobile entertainment services were blocked online in China earlier this month just at a time when it wants to grow services business as potential source of revenue against tapering iPhone sales.