Apple in China: Vanishing iPads
This is the second installment in our “Apple in China” weekly series. Remember that Greater China has been an important geographic segment – more so when the region accounted for one-fourth of Apple’s revenues, in 2015. Lately, this market has been a drag to the company’s financial performance.
I continue to keep a finger on the pulse of Apple’s business in the Far East. Last week, I discussed the heating up of the US-China trade war and the supply chain musical chairs. The topic of this week is the iPad.
Huawei has enforced its home court advantage over Apple.
In the first calendar quarter of the year, the Chinese company surpassed its US counterpart in tablet units shipped in China. Huawei seems to have been the only major player to do well during the pandemic, since the tablet market as a whole saw shipments nosedive by 30%. Apple’s unit sales dropped by over 42%.
“Higher demand for online education and remote working” benefited the Chinese maker, but apparently no one else. Credit was given to Huawei for anticipating the trend, while competitors lacked plant capacity to supply the market during the tough times.
What may have happened
I am surprised to see such a disparity among tablet vendors. Perhaps Huawei had a sales channel advantage. Tablet sales on JD.com, the country’s second largest e-commerce platform, climbed 77% while Apple stores remained shut down for a few weeks. Or maybe Huawei was nimbler at securing production when manufacturing activity screeched to a halt in the country.
It is also likely that Apple got caught in between iPad refresh cycles. The new 10.2-inch model was launched in September 2019, while the next update to the Pro did not occur until March 2020. Demand for the middle-of-the-road trim was probably higher in the early weeks of last year’s holiday season. At the same time, demand for the higher-end model will probably not be evident on the income statement until Apple reports earnings for the current period.
Looking beyond the quarter-by-quarter dynamics, Apple is still the king of tablets worldwide. In 2019, it captured around one-third of the market, with Samsung diligently defending its runner-up position. However, the gap between the two leading companies narrowed substantially in the first quarter of 2020 – suggesting that Apple’s recent iPad problem has not been China-specific.