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“The competitive environment there (in China) is the most competitive in the world. I’ve said that before, and it’s still the case now.”

Cook said this when explaining the continued decline in revenue in Greater China in the new quarterly financial report. In the early morning of August 2, Beijing time, Apple released its third quarter financial report for fiscal year 2024 (i.e., the second quarter of 2024) ending June 29, 2024. Among them, revenue in Greater China was US$14.7 billion, a year-on-year decrease of 7%, which was lower than the US$15.3 billion expected by analysts.

Worse,In the Chinese market, this is the fourth consecutive quarter that Apple has experienced a year-on-year revenue decline.

The expansion in emerging markets has slightly made up for Apple's unfavorable situation in the Chinese market. For example, Apple opened its first store in Malaysia and set quarterly revenue records in India, Indonesia, the Philippines and Thailand. These efforts helped Apple achieve revenue of US$85.8 billion in the second quarter, a year-on-year increase of 5%, and net profit of US$21.4 billion, a year-on-year increase of 8%.

In addition to the Chinese market, another focus of the public is undoubtedly the upcoming Apple Intelligence. During the earnings conference, questions about Apple Intelligence were almost always asked.

Apple CEO Tim Cook got straight to the point: “We very much look forward to sharing these AI tools with our users and will continue to invest heavily in innovation to enrich our customers’ lives.”

On the eve of the financial report release, Apple initially unveiled some Apple smart experiences in the developer beta version of iOS 18.1. The test functions mainly revolve around writing tools (Writing Tools), new Siri, photo albums, and the finally arrived call recording. The ChatGPT function has not yet been integrated.

But it is worth noting that in the developer beta update push of iOS 18.1, Apple specifically reminded that to try out Apple smartphones, the phone needs to be upgraded to 15 Pro/Pro Max, and it is not currently supported in the EU and China.

As for when it will be open? Cook said that Apple has had very constructive cooperation with regulators in both regions. "Our goal is to take action as quickly as possible. We must first understand the regulatory requirements before we can commit to what to do and set a corresponding timetable."

As for the cost of cooperation between Apple and OpenAI, which is of concern to the outside world, it has been rumored that the two sides are more of a resource exchange, and neither side has charged licensing fees. Cook did not make a clear statement this time, only saying, "As for the monetization model, I don't want to get involved in the terms of the commercial agreement because they are confidential to both parties."

However, Cook revealed that Apple will launch the American English version to users starting in the fall.ChatGPT will also be integrated into the iPhone before the end of the year.By next year, Apple will launch more features and expand to more languages ​​and regions.

As Apple smartphones are expected to bring about a wave of demand for phone replacement, Apple CFO Luca Maestri gave a fairly optimistic financial outlook, predicting that total revenue in the third quarter will continue to grow year-on-year, with the growth rate expected to be similar to that in the second quarter.

A

In the second quarter, the iPhone, as Apple's core hardware product, became one of the few businesses with a year-on-year decline in revenue, with revenue of $39.3 billion, a slight decrease of 1%. Another business with a year-on-year decline in revenue was the wearable, home and accessories business, with revenue of $8.1 billion, a year-on-year decrease of 2%.

In terms of other products, Mac revenue was $7 billion, a year-on-year increase of 3%. Service business revenue was $24.2 billion, a year-on-year increase of 14%. With the launch of the new iPad Pro and iPad Air, the iPad product line became the fastest growing business in the quarter, with revenue reaching $7.2 billion, a year-on-year increase of 24%.

Greater China was the only region where Apple's revenue declined year-on-year in the second quarter.Revenue for the quarter was $14.7 billion, down 7% year-on-year. In other regions, Apple's revenue in the Americas was $37.7 billion, up 6% year-on-year; in Europe, it was $21.9 billion, up 8% year-on-year; in Japan, it was $5.1 billion, up 6% year-on-year; and in the rest of Asia Pacific, it was $6.4 billion, up 14% year-on-year.

This is the fourth consecutive quarter of revenue decline for Apple in the Chinese market. In the third quarter of last year, Apple's revenue in Greater China was $15.1 billion, a year-on-year decrease of 2.6%; in the fourth quarter of last year, Apple's revenue in Greater China was $20.8 billion, a year-on-year decrease of 13%; in the first quarter of this year, Apple's revenue in Greater China was $16.4 billion, a year-on-year decrease of 8%.

Along with the revenue decline, iPhone sales in the Chinese market also declined.Canalys data shows that in the second quarter of 2024, the smartphone market in mainland China further recovered after experiencing the inflection point in the previous quarter, with shipments increasing by 10% year-on-year and returning to the level of 70 million units.

However, Apple bucked the trend, with its market share falling 2% year-on-year and its ranking dropping to sixth. This marked the first time in history that domestic mobile phone manufacturers took the top five spots in the Chinese mainland market.

Canalys research analyst Zhong Xiaolei believes that "in recent years, Chinese manufacturers' firm implementation of the high-end strategy and in-depth collaboration with local supply chain partners have gradually achieved results in both software and hardware."

But Apple is expected to inject new growth momentum into the iPhone. Wedbush analyst Dan Ives predicts that starting with the iPhone 16, the Chinese market will grow again.

Some media even revealed that Apple has increased its shipment forecast for the iPhone 16 series to 90 million units in 2024, a 10% increase compared to the iPhone 15 series in the same period.

The main driving force behind the upward revision of expectations is Apple's confidence in Apple Intelligence. After all, if you want to experience Apple intelligence, there are certain requirements for mobile phone hardware, that is, the memory must reach 8GB or more, which is why Apple intelligence can only run on iPhone 15 Pro/15 Pro Max. According to supply chain information, the iPhone 16 series is expected to come with 8GB of memory as standard.

But how enthusiastic is Apple Intelligence about iPhone replacement? Cook did not give a definite answer, only saying that "in terms of upgrade rates, it is difficult to predict in the medium term. I would just say that with Apple Intelligence, we are very excited about the level of value we will provide to users. We believe this provides another reason for a compelling upgrade."

Despite facing more intense competition in the Chinese market, Cook remains confident in its long-term opportunities. "I don't know how the Chinese market will develop at every stage, but we are very confident in the long-term prospects."

B

However, one fact that may slightly undermine Cook's confidence is that the Chinese version of the iPhone 16 series released in the fall will not be able to experience Apple intelligence for the time being.

According to Apple’s phased push plan, only American users will be the first to experience the iPhone 16 with Apple’s smart features this fall, while users in China will have to wait until next year.

Faced with the reality of iPhone's continuous price cuts and promotions, some Chinese users will undoubtedly be troubled as to whether to buy first and enjoy first, or wait until next year when Apple officially launches the iPhone 16 at a more affordable price.

As early as June when Apple Intelligence was first unveiled, Craig Federighi, Apple's senior vice president of software engineering, said that Apple was working hard to find ways to introduce "Apple Intelligence" to the Chinese market. "Although there is no specific timetable at present, this is definitely what we want to do."

Taking Samsung as an example, one of its ways to bring AI big models into the Chinese market is to cooperate with Chinese manufacturers. It has already connected to Baidu Wenxin Big Model and Byte Doubao Big Model.

In March this year, when Cook visited China, there was news that Apple was expected to reach a cooperation with Baidu to introduce the latter's Wenxin model into Apple devices such as iPhone 16. So far, no further news has been released between the two parties.

In order to achieve the goal of providing features for everyone, Cook mentioned that Apple is taking action as quickly as possible. "We must first understand the regulatory requirements before we can commit to doing so and set a timetable. But we have worked very constructively with regulators in both the EU and China."

The imperfection of Apple's smartphones is also one of the reasons that prevent Cook from promoting it to more regions as quickly as possible.According to some users' experience with the iOS 18.1 developer beta, the AI ​​performance it demonstrates is still significantly behind ChatGPT, Gemini, etc.

Bloomberg technology reporter Mark Gurman broke the news:Apple smartphones will be delayed until October.This means that the iPhone 16, which will be unveiled in September, will not be pre-installed with Apple Intelligence.

Gurman further explained that both Apple and developers need enough testing time to optimize Apple Intelligence. Even after Apple Intelligence is launched in October, users will not be able to experience all the AI ​​features described by Apple at WWDC. For example, Siri, which has a complete intelligent experience, may not be launched until the first half of 2025.

This may also be the reason why Cook did not forget to remind at the earnings conference that "we will continue to invest heavily in AI technology and strive to innovate to realize its full potential."

C

In addition to lagging behind the Android camp in big AI models, Apple's pace of innovation is also attracting more and more doubts.

After Apple's second quarter earnings report was released, Gurman commented that from a financial perspective, everything is fine with Apple. However, the company's pace of innovation has been far from what it used to be, and it may have missed out on the latest major new products while eliminating future sources of growth such as internal screen technology and cars. I don't see any game-changing products in Apple's product roadmap for the next two to three years.

Cook has planned three major breakthrough areas for Apple's future: artificial intelligence, AR and autonomous driving.

In addition to the artificial intelligence that it is catching up with, Apple's car project related to autonomous driving has been officially shut down.

At the end of February this year, Apple officially stopped the car project after 10 years of research and development and billions of dollars of investment. The car was once regarded as the most mysterious and confidential project within Apple, and was even regarded by Ming-Chi Kuo as a key weapon to increase Apple's market value by $1 trillion.

However, faced with the numerous challenges of implementing autonomous driving, Apple made a choice between the two dilemmas and ultimately turned to the more urgent AIGC to protect its core hardware, the iPhone.

The hybrid headset Vision Pro has also seen slowing sales since its release in February. According to market tracker IDC, Vision Pro sales have yet to break 100,000 units in a quarter.

After being released in more countries and regions including China at the end of June, IDC predicts that Apple Vision Pro's total sales in 2024 will not exceed 500,000 units.

Another area where Android has been working hard to develop foldable screens is the foldable screen. Recently, there has been new news about Apple.Some media have revealed that Apple has completed the research and development of the foldable iPhone and is currently working with suppliers to prepare for mass production. Product testing is already underway and it is expected to be released as early as 2026.

In 2019, when Samsung's first foldable phone, the Galaxy Fold, was released, rumors began to circulate online that Apple was also preparing a foldable iPhone. Over the past five years, not only have many foldable iPhone renderings been exposed online, but also a lot of patent information related to Apple's foldable products has been disclosed.

Whether the much-rumored foldable iPhone can be launched around 2026 will remain a new question of doubt.

Even if the foldable iPhone is launched as scheduled, it will be a big challenge for Cook to prove to the outside world that Apple still has the ability to catch up.