00:00 Let's get some more analysis on this with Santosh Rao, Head of Research at Manhattan Venture Partners.
00:06 Welcome back to the program. Good to see you, Santosh.
00:08 So we just heard there about Apple's new massive store in China.
00:12 It's the company's second biggest in the world after Fifth Avenue in New York.
00:16 Tim Cook himself was there at the ribbon cutting.
00:19 Is this a massive vote of confidence in the Chinese market?
00:23 Absolutely. Thank you for having me.
00:26 I think China is a huge market, the second biggest economy.
00:29 So you cannot really disregard it or not take that into account.
00:35 So Apple is doing the right thing. It's investing in there.
00:39 It's already in like 40 some cities in China, 19 stores.
00:44 So I think it's a huge, huge market.
00:47 I may have the percentages off, but a huge, huge presence in China.
00:51 So this is another addition in the biggest market in China.
00:55 So I think that makes sense. And China wants to open up the market, show the world that they're open for business.
01:01 So it's both and China and Apple needs to defend its 19 percent share of revenues from China.
01:09 So that's a huge chunk of close to 19 billion, I think, huge numbers, billions of dollars, so to speak.
01:17 So I'm sorry, 70 billion dollars. So that's 19 percent of their sales.
01:22 So I think they're going to do the right thing. China is doing the right thing by opening it up and helping out.
01:26 So it's a mutual thing. Apple needs China and China can use Apple in terms of its own GDP, in terms of its own employers.
01:34 It employs a lot of people there. So net net, it's positive for both.
01:38 So it helps to be helpful to each other.
01:42 So China's open for business. It's open for Apple.
01:45 Nonetheless, sales of iPhones in China have slowed, haven't they, as we were just reporting.
01:51 And is this because of the popularity of Chinese homegrown brands like Xiaomi, the smartphone maker?
01:57 Is that the main reason that iPhone sales are suffering?
02:01 Yes, two or three things going on. One is that overall smartphone sales worldwide have slowed down.
02:08 That's another. That's a whole macro thing that's going on.
02:12 But within that, the high end phones, which is iPhones, the premium models, they're doing well,
02:19 but they're being threatened by Huawei and the other other suppliers.
02:23 And there is a nationalistic sentiment, I guess, also in China.
02:28 They want them to buy local. So that's kind of affecting them also at the margins.
02:33 But overall, yes, China sales were down last quarter, I think 25 percent down.
02:40 So that so there is definitely a dent in the overall sales of inch into China.
02:47 But Tim Cook is pretty confident that it'll come back.
02:51 It's temporary blip. And so I think that's what he's doing right there.
02:55 He's on a goodwill mission, so to speak, want to spread the good word, be out there.
03:00 And so I think he's doing the right thing to kind of saying that, hey, we're here for good.
03:05 We're here for you. And we're going to come up with the next generation of phones,
03:08 which is going to be even better than the iPhone 15.
03:12 And that certainly does seem a lot of goodwill to go around.
03:14 Apple investing millions of dollars into its applied research labs in China.
03:19 How much could the company benefit from changing foreign investment policies in China?
03:26 Oh, they'll benefit a lot. I mean, if China is constructive and helpful in terms of bringing investments in,
03:32 that's very helpful. And Apple doesn't need to be doesn't need any kind of support.
03:38 The products sell themselves. Right now, you've had a lull in terms of upgrades.
03:44 iPhone 14 to 15. There haven't been much change. But iPhone 16 is going to be very good.
03:50 It's going to have generative AI at the edge and things like that.
03:53 So it's going to have AI. And that's the big expected expectation with iPhone 16.
04:00 And I think Chinese will love to have that. Chinese consumers would love to have that phone.
04:05 So Chinese products will stand on its own. There is a demand. It sells itself easily.
04:10 But what it needs is support. It doesn't need any obstruction from the government.
04:14 To the extent that they put restrictions and cause any negative PR for Apple and any foreign manufacturer.
04:23 I think that's bad for them. So it doesn't help China either in discouraging others to come in.
04:28 But I think for Apple, if the government is constructive, I think it will do very well.
04:33 The sales will come back and they'll stand on their own.
04:37 OK, Santosh, we'll leave it there. Always great to get your thoughts.
04:39 Thank you very much indeed. That's Santosh Rao from Manhattan Venture Partners.
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