Apple’s declining iPhone sales continued in its latest quarterly earnings filing, but the juggernaut posted a 1% increase in revenue anyway compared to a year earlier, hitting $53.8 billion.
It was the biggest June quarter ever for Apple, propped up by wearables, services and iPad and Mac revenues. CEO Tim Cook cited “significant improvement in iPhone trends” on Tuesday even though iPhone sales declined 12% with sales of $25.99 billion for the quarter.
Customers are holding onto smartphones for longer, and there are many competitors are in the market, especially from China, some with feature-rich phones that cost less, analysts said. Cook acknowledged that customers are “holding onto their device a bit longer than they were [but] they are staying in the [Apple] ecosystem,” according to a transcript by Seeking Alpha of the earnings call.
The stock rose 4% after the Tuesday close to $217.45. Net income was $10 billion, down from $11.5 billion the same quarter a year ago, which is Apple’s third fiscal quarter.
On the conference call, Cook was asked about competition from 5G Android phones launching in China in 2020.
He responded that Apple doesn’t comment on future products, then added: “With respect to 5G, I think most people would tell you, we’re in sort of the extremely early innings of it. And even moreso on a global basis. So, we couldn’t be more proud of what our lineup is and we’re excited about the great pipeline of both hardware and software and we wouldn’t trade our position for anyone’s.”
Cook also confirmed that Apple Card will launch in August.
Regarding Apple’s purchase of most of Intel’s smartphone modem business for $1 billion, Cook noted it is the second-largest acquisition by dollars and the largest ever in terms of staff, adding 2,200 Intel workers to Apple’s ranks.
He said in addition to growing Apple’s portfolio of wireless technology patents, the Intel purchase “will expedite our development of our future products and …further our long-term strategy of owning and controlling the primary technologies behind the products that we make.”
Regarding the trade war with China and the U.S., Cook was asked about the potential for alternatives to manufacturing in China and whether Apple would relocate parts of its production out of China. Cook said there’s been a lot of speculation and added: “The way I view this is, the vast majority of our products are kind of made everywhere. There’s a significant level of content from the U.S. and a lot from Japan to Korea to China, and the EU also contributes a fair amount. So that’s the nature of a global supply chain. Largely, I think that will carry the day in the future as well.“
He noted that Apple has been making the Mac Pro in the U.S. and wants to continue do so by investing in manufacturing capacity. In terms of getting exclusions from U.S. trade bans with China, he said Apple is hoping for a “positive outcome.”
Apple’s A-series chips used in iPhones and iPads are exclusively supplied by TSMC, but Ploutos Investing recently wrote that Apple may choose to source those chips to another supplier such as Samsung to reduce reliance on one supplier. Apple’s purchases make up about 20% of TSMC’s revenues which were $7.75 billion in the second quarter. TSCM, based in Taiwan, is the world’s largest independent semiconductor foundry.