On November 2nd, Eastern Time, Apple announced its results for the fourth quarter of the 2023 fiscal year, which is the third quarter of the natural year. According to the financial report, as of the end of September, Apple's sales for the quarter were $89.498 billion, a slight decrease of 0.7% year-on-year. Net profit continued to climb, increasing by 11% year-on-year to $22.956 billion, and its gross profit margin remained as high as 45.2%.
It is worth noting that although Apple's revenue slightly exceeded market expectations, this is the fourth consecutive quarter of year-on-year revenue decline for Apple. According to statistics, this is also Apple's longest decline record since 2001.
On the one hand, consumer electronics has been hovering at a low point in the past year, and on the other hand, the revenue of various regions and products has fluctuated. For example, Apple's revenue in Greater China this quarter was $15.08 billion, a year-on-year decrease of 2.5%, lower than the market estimate of $17.01 billion. Especially compared to the year-on-year growth rate of 7.9% in the previous quarter, the downward trend is more obvious.
This is also reflected in the data of the Chinese mobile phone market. Canalys research manager Liu Yixuan analyzed to 21st Century Economic Report reporters, "Apple's mobile phone shipments in the Chinese market in the third quarter fell by 6% year-on-year. The decline in the mobile phone market and the recovery of release rhythm (iPhone 14 release one week earlier) have had a certain impact on shipment performance, and Apple has basically stabilized its market share compared to last year
At the same time, Liu Yixuan also pointed out that although Apple's popularity and demand in the Chinese market are still high, the catching up Android high-end camp has had an impact on Apple. For example, Huawei's "return" to high-end users to switch phones and brands, as well as the subsequent iteration of high-end lines, are the challenges that Apple is about to face.
IPhone Greater China revenue decline
From the perspective of the entire fiscal year 2023, Apple's total net sales for the year were 383.285 billion US dollars, a decrease of 3% from the previous year's 394.328 billion US dollars; The net profit was $96.995 billion, a decrease of 3% from $99.803 billion in the same period last year.
In the sluggish consumer electronics cycle, even Apple cannot resist the decline in revenue and profits. However, a single digit decline of 3% is already better than the mobile phone market, and market share and revenue are basically stable.
Specifically, in the fourth fiscal quarter, Apple's revenue from iPhone and software services increased this quarter, while product lines such as Mac, iPad, wearable, and home appliances all declined year-on-year. This also means that in the fourth fiscal quarter, among Apple's hardware products, only the mobile phone business increased year-on-year.
From a product perspective, the net sales of the iPhone business were $43.805 billion, a year-on-year increase of 3%, accounting for 52.1% of the total revenue; The net sales of the Mac business were $7.614 billion, a year-on-year decrease of 34%, but exceeded the market expectation of $8.76 billion; The net sales of the iPad business were $6.443 billion, a decrease of 10% year-on-year, exceeding the expected $6.12 billion; The net sales of wearable, home furnishings, and accessories businesses were $9.322 billion, a slight decrease of 3% year-on-year, failing to meet market expectations of $9.41 billion.
Although the hardware series has collectively declined except for the iPhone, revenue from software services continues to grow. Apple's software services business achieved revenue of $22.314 billion this quarter, a year-on-year increase of 16%, reaching a historic high and exceeding market expectations of $21.37 billion.
Looking at the regional revenue situation, among the five core regions, only the Americas market saw a year-on-year increase of 1% in revenue, while other regions experienced a single digit decline. Greater China, which accounts for about 17% of Apple's annual revenue, saw the most significant decline.
Among them, the net sales of Greater China in the fourth fiscal quarter were $15.084 billion, a decrease of 2.5% from $15.47 billion in the same period last year; The net sales revenue in the Americas was 40.115 billion US dollars, a year-on-year increase of 1%; The net sales revenue in Europe was 22.463 billion US dollars, a year-on-year decrease of 1%; Japan's sales revenue was 5.505 billion US dollars, a year-on-year decrease of 3%; The net sales of other Asia Pacific regions were 6.331 billion US dollars, a year-on-year decrease of 1%.
During the earnings call, Apple CEO Cook mentioned that the iPhone 15 performed better than the iPhone 14 in the September quarter of last year when discussing the Chinese market.
Nevertheless, Apple is facing new challenges in the Chinese market, with Huawei and Android launching new offensives. Since the beginning of this year, Cook has also frequently visited China, visiting suppliers such as Li Xun Precision, visiting the ecosystem, and voicing public welfare businesses.
Changes in the Chinese mobile phone market
In terms of the global market, Canalys reported that in the third quarter of 2023, the decline in the global smartphone market narrowed to 1%. As manufacturers improved their inventory situation in the second quarter and launched new products in the third quarter, the shipment volume reached 294.6 million units. Samsung is at the top of the list, thanks to the earlier iteration of new folding screen products, which has solidified its market position, with a shipment volume of 58.6 million units and a market share of 20%. Driven by the demand for the new iPhone 15 product, Apple followed closely, with shipments of 50 million units and a market share of 17%.
In terms of the Chinese market, there has been a significant change in the ranking in the third quarter, with Honor, OPPO, and Apple in the top three. According to the latest data from Canalys, the competition in the domestic mobile phone market is becoming increasingly fierce as the end of the year approaches. And Apple ranks third among major manufacturers with a shipment volume of 10.6 million units. Despite increasingly fierce market competition, the release of the iPhone 15 series still contributed to Apple's shipments in the third quarter.
With the arrival of the "Double Eleven", Apple has also launched a price reduction strategy. Online Apple flagship stores, including JD.com and Tmall, have now made price adjustments to the iPhone 15 series to cope with the decline in the Chinese market. Some products can have a price difference of 700 to 800 yuan after using coupons compared to when they were launched.
The reporter observed at the official flagship store of Tmall that the discounted price of the iPhone 15 starts at 5299 yuan, the iPhone 15 Pro starts at 7499 yuan, and the iPhone 15 Pro Max starts at 9499 yuan. On JD.com, the estimated purchase price for iPhone 15 is 5999 yuan, while the iPhone 15 Pro is 8999 yuan, and the iPhone 15 Pro Max price is 9999 yuan.
Domestic consumers and the market have also responded positively to the iPhone 15 series phones, and Apple remains the mainstream choice in the high-end mobile phone market. As of November 3rd, the JD mobile racing chart showed that iPhone 15 Pro max, iPhone 15 Pro, and iPhone 15 respectively occupied the top three spots on the list; And the top two on the "Double Eleven" smartphone must buy list on Tmall are also occupied by the iPhone 15 series products.
In the high-end market, Apple still holds the main share. According to the data provided by Canalys to reporters, in the high-end mobile phone market with more than $600 in Chinese Mainland in the second quarter, Apple accounted for 63% of the market share and Huawei accounted for 19%.
However, the counterattack by domestic manufacturers has begun, both Huawei's return and Android phone manufacturers are upgrading and iterating in the software and hardware ecosystem, and the competition is also expanding.
According to Zhong Xiaolei, a research analyst at Canalys, Android manufacturers are striving to build an ecosystem to compete with iOS. Consumers are increasingly willing to switch camps for a better ecological experience, which has led major brands to start developing self-developed operating systems and enhancing their brand image by showcasing their research and development capabilities. For example, the Huawei Mate 60 series provides a comprehensive ecological experience through self-developed SoC and Hongmeng operating systems. Xiaomi's surging OS has also improved the communication between multiple devices Internet experience has become a recent focus. The self-developed system is expected to open up multiple revenue growth curves for manufacturers beyond smartphones, such as IoT and new energy vehicles
When will the supply chain recover?
Since the third quarter, there have been signs of a rebound in the consumer electronics market, driving the recovery of prosperity in the upstream and downstream of the industrial chain.
Multiple industry chain companies have significantly improved their Q3 revenue compared to the previous month, such as Lansi Technology, Lixun Precision, and Weier Group. Crystal Optoelectronics and Guanghong Technology saw a significant increase of 73.57% and 54.40% in Q3 revenue compared to the previous month.
Specifically, the leading company in the fruit chain, Lixun Precision, maintained a growth trend, with a total revenue of approximately 155.875 billion yuan in the first three quarters, a year-on-year increase of 7.31%; The net profit attributable to the parent company was 7.374 billion yuan, a year-on-year increase of 15.22%; As one of the main suppliers of glass panels for the iPhone series, Lansi Technology achieved a revenue of 33.808 billion yuan in the first three quarters, a year-on-year increase of 7.07%; The net profit was 1.649 billion yuan, a significant increase of 117.23% year-on-year.
However, not all fruit chain companies have a relatively optimistic market performance. As a core supplier of Apple parts, Goethe Holdings, in its recently disclosed third quarter 2023 report, stated that the company achieved operating revenue of 73.948 billion yuan in the first three quarters, a year-on-year decrease of 0.28%; The net profit attributable to shareholders of the listed company was 892 million yuan, a year-on-year decrease of 76.77%.
However, overall, the industry is already anticipating a bottoming out in the mobile phone market.
On November 2nd, Qualcomm CEO Amon stated at the financial report that the Android phone market has basically emerged from inventory problems. Qualcomm executives also stated that they expect the chip business revenue to increase month on month in the first quarter of the 2024 fiscal year, mainly due to improved inventory in the Android mobile phone channel and the release of new flagship models, driving up demand. Revenue from Chinese mobile phone manufacturer customers is expected to increase by over 35% month on month.
Recently, MediaTek CEO Cai Lixing also pointed out the same trend at the financial report briefing, saying, "In the past few months, overall channel inventory has improved, and the inventory turnover days at the end of the third quarter have reached the level of 90 days. It is expected that the entire inventory environment will continue to improve in the future
Canalys Senior Analyst Zhu Jiatao told 21st Century Economic Report reporters, "The inventory situation in the upstream supply chain has improved, and OEM manufacturers have begun to rebuild inventory of some key components. We have even seen supply shortages in some local parts. Due to the oversupply stage, some supply chains have reduced production capacity, and in the face of demand recovery, it will take some time to increase production capacity again, so it is possible to see price increases
Regarding the overall development prospects of the smartphone industry in the next year, Zhong Xiaolei stated that it is expected that the global smartphone market will achieve moderate growth in 2024 under a cautious trend. Manufacturers are expected to have relatively healthy inventory levels by the end of 2023, and there is enough space to rebuild inventory to meet potential demand recovery. At present, the medium to long-term market growth is still facing bottlenecks due to factors such as prolonged replacement cycles in major markets. In the competition of existing markets, manufacturers must continuously build their capabilities and focus on optimizing profits and product lines.