Can a 13% year-on-year decline in net profit per quarter save Apple from a 5G version of the iPhone?


Can a 13% year-on-year decline in net profit per quarter save Apple from a 5G version of the iPhone?
Journalist Lu Xiao reports from Beijing
Apple released its report card for the second quarter of this year.
In the early morning of July 31, Apple announced that its revenue in the third quarter of 2019 (the second quarter of the natural quarter) was $53809 million, up 1% from a year earlier. In addition, net profit of $10.444 billion fell 13% year-on-year. As a reference, FAANG’s four other companies, Facebook, Amazon, Netflix and Alphabet, the parent company of Google, grew revenue from 19% to 36% in the current period.
The rapid growth of services and other revenue means that it will become a new engine for Apple’s growth. But for the third consecutive quarter, sales of the iPhone, which once contributed nearly 70% of Apple’s revenue, fell by double digits. The turnaround seems to be waiting until Apple launches its 5G phone next year.
New growth engine
Although compared with the other four FAANG companies, Apple’s revenue growth looks very thin. But compared with the decline of 4.5% and 5.1% in revenue in the first two quarters of 2019, the 1% growth also means that Apple revenue will finally return to the growth track in 2019.
Increases in services and other revenue are important reasons for Apple’s resumption of revenue growth. Apart from the wearable devices business, which grew by more than 50% year-on-year, Apple’s services business achieved revenue of nearly $11.5 billion for the first time in the third quarter, up 13% year-on-year.
Apple CEO Tim Cook also said in a post-earnings analyst conference call that there are more than 420 million subscriptions to paid services across the platform. He hopes that by 2020, revenue from services will double on the basis of fiscal year 2016. In the conference call, Apple CFO Luca Meistry revealed that by 2020 Apple should have more than 500 million subscribers.
According to the reporter of China Times, in addition to the original ApplePay, iCloud, App Store application sharing and other businesses, Apple launched Apple News + subscription service, credit card business and Apple Arcade game subscription service in March this year.
Cook also said on the same day that, driven by the strong growth of China’s application stores, service revenue in Greater China achieved double-digit growth. Meistry further explained that the commercialization of Apple App Store in China is mainly through game downloads, while the Chinese government approved some important game versions in the third quarter of Apple.
It should be mentioned that Apple also performed better in China than in the previous two quarters. At the end of last year, in an open letter to investors, Cook lowered his performance expectations for the first quarter of 2009, while the decline in iPhone revenue in China was the reason Cook gave. Subsequently, Apple made a series of price adjustments to the iPhone in the Chinese market, and implemented strategies such as replacing the old with the new. According to the results, in the second quarter of fiscal year 2019, Apple’s revenue in Greater China was $9.16 billion, down 4% from the same period last year. In the first two quarters, the decline was 27% and nearly 22% respectively.
Late 5G iPhone
But it’s worth noting that the iPhone still did not grow in the third quarter of fiscal year 2019. The results show that the current sales of the iPhone have declined by double digits for the third consecutive quarter. Meanwhile, revenue for the current iPhone fell 12%, but it has narrowed from 17% in the first quarter. In addition, the current $26 billion revenue of the iPhone fell to 48.3% of total revenue. The implication of this figure is that for the first time in seven years, the share of iPhone revenue has fallen below 50%.
Focusing on China’s mobile phone market, Canalys, a market research company, released statistics on July 30 that showed Apple’s smartphone sales in China fell 14% to 5.7 million units in the second quarter of this year, ranking fifth with a 5.8% share. In fact, in the top five of the list, apart from the 30% rise in Huawei, the 14% decline experienced by the iPhone was the smallest among the remaining four mobile phone manufacturers. In addition, the overall shipment volume of China’s mobile phone market shrank by 6%.
Many people in the industry interviewed by the reporter of the China Times believe that it will be very difficult for the sales of the 5G iPhone to improve significantly before the arrival of the 5G iPhone next year.
Guo Mingpi, an analyst at Tianfeng International, had previously predicted that Apple would launch three 5G versions of the iPhone next year, with Qantom’s X55 baseband chip released this year. On July 25, Apple also announced an agreement with Intel to buy most of Intel’s smartphone modems for $1 billion. The deal is expected to be completed in the fourth quarter of 2019.
But the 5G mobile phone of the domestic mobile phone manufacturer has already been unveiled. On July 26, Huawei Mate 20X (5G) was released as the first commercial 5G dual-mode mobile phone. Comparing with the price that the outside world thought would exceed 10,000 yuan, the price of 6,199 yuan is close to halving. This means that the popularization of 5G mobile phones in the Chinese market will be accelerated.
Fu Liang, a telecom analyst, told the Huaxia Times that Apple had not caught up with the first wave of 5G mobile phones and could not catch up in the first half of next year, but Apple would catch up with the brand advantage later. But in the era of 5G mobile phones, would Apple’s “late” tactics be as effective as in the era of 4G?