Apple, which lost its leading position in the smartphone market in China, is expected to report strong fourth-quarter results for last year. Although iPhone sales have decreased due to the impact of its largest consumer market, China, an increase in revenue from the institutional sector has compensated for this. However, there are observations that this year, Apple may struggle to defend its performance due to inadequate artificial intelligence (AI) features and a decline in iPhone sales within China.
According to industry sources and U.S. securities firms on the 21st, Apple is expected to achieve fourth-quarter revenue of $124.19 billion (approximately 178.53 trillion won), which is a 3.9% increase compared to the same period last year, and an operating profit of $35.6 billion (approximately 51.22 trillion won), a 4.8% increase from the previous year. Although the performance improved compared to the same period last year, the operating profit increase has decreased by around 8 percentage points. Apple recorded an operating profit of $30 billion (approximately 43.22 trillion won) in the fourth quarter of 2023, an increase of 13% compared to the previous year. Typically, the fourth quarter is when the global launch of iPhones concludes, making it the period when Apple generates its highest revenue of the year.
The improvement in Apple's fourth-quarter performance last year is attributed to the institutional sector. Apple currently sells service products including the music streaming service 'Apple Music' and the product warranty service 'Apple Care.' Market research firm Counterpoint Research predicts that Apple's service-related revenue will reach $100 billion (approximately 143.64 trillion won) this year, marking the first time that its share of total revenue will reach 25%.
On the other hand, it is observed that the increase in operating profit has slowed due to the decline in iPhone sales in China. According to market research firm Canalys, last year in the Chinese smartphone market, the budget smartphone maker Vivo held a 17% market share, while the high-end product maker Huawei captured 16% for second place. Apple's market share was limited to 15%. It is estimated that iPhone sales in China fell by 25% in the fourth quarter of last year.
China is the largest consumer of iPhones, accounting for 24% of total iPhone sales. However, since 2023, amid a patriotic consumption trend, local manufacturers such as Vivo and Huawei have gained popularity, resulting in a decline in sales. The iPhone is a major product that constitutes half of Apple's total sales.
Apple is expected to struggle to rebound its performance this year as the decline in iPhone consumption in China continues. Kuo Ming-chi, a researcher at Taiwan's TF International Research, noted that "iPhone shipments are expected to decrease by 6% in the first half of 2025, with most of the decline occurring in the second quarter."
Apple's ambitious AI service 'Apple Intelligence,' developed to boost device sales including iPhones, is also plagued by error issues. This month, the main feature of Apple Intelligence, the news summary function, faced errors, leading to its suspension just six months after launch. In December last year, the BBC reported on Luigi Mangione, who was arrested as a suspect in the murder of Brian Thompson, an executive at an insurance company in New York City. However, on some iPhones, this news was incorrectly summarized as "Luigi Mangione committed suicide." Apple apologized for this and stated it would proceed with updates.
Chae Hyo-geun, vice chairman of the Information Technology Services Industry Association, said, "As Apple's position in China, the largest smartphone market, becomes unstable, it seems to continue efforts to diversify its revenue structure toward service revenue or explore emerging markets."