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Economic Outlook: Apple's big secret

Wednesday, April 25, 2012 9:07 AM


Here's a twist: Apple, the world's most valuable company, said that it nearly doubled profits in its second quarter with a huge lift from sales in China.

Let's have that again. Apple, at last sighting, was a U.S. company, was it not?

China, meanwhile, is that enormous marketplace ripening right before our eyes, but with a central bureaucracy designed to frustrate every move a U.S. company makes on its soil.

China's sins in commerce overflow the cup. The country seems to care about intellectual property rights, but only to a point, and thumbs its nose at the world through currency manipulation. The government knows leverage when it falls in their laps and, thus, controls the world's supply of rare earth minerals without apology. Export industries are subsidized, foreign companies barred from the door unless they team up with a Chinese concern, which gives that Chinese firm a fair portion of what should be hard-earned U.S. profits. It has irresponsible pollution laws, which makes it cheaper to produce goods.

China's middle name is protectionism. But, simply put, China plays hard ball. It is in this for keeps. And it wants to do the keeping.

But it doesn't take too long to figure out how Apple marched into China and came away with $7.9 billion in revenue in its second quarter.

The New York Times said Apple's revenue from China was 2 percent of its total just two years ago but has jumped to 12 percent.

Suffice it to say, all the numbers fall into place from there.

Apple sold 35.1 million iPhones in the quarter, nearly 90 percent more than it sold in the same quarter of its last fiscal year. It sold 11.8 million iPads, more than double what is sold in the same quarter a year earlier.

"It was an incredible quarter in China. It is mind-boggling that we could do this well," Chief Executive Officer Tim Cook said in a conference call.

The secret is as plain as the nose on a face, so let's not belabor the obvious: Apple builds products people want to buy.

The surprise is that Apple's products are not particularly cheap. But this should be the last time this surprises anyone for a while. It's not to say China is the new market for luxury goods. On the other hand, who's to say where the limits lie?

In international markets Wednesday, the Nikkei 225 index in Japan rose 0.98 percent while the Shanghai composite index in China gained 0.75 percent. The Hang Seng index in Hong Kong slipped 0.15 percent while the Sensex in India lost 0.33 percent.

The S&P/ASX 200 in Australia rose 0.18 percent.

In midday trading in Europe, the FTSE 100 index in Britain was virtually flat while the DAX 30 in Germany added 1.17 percent. The CAC 40 in France climbed 1.68 percent while the Stoxx Europe 600 gained 0.7 percent.
ANTHONY HALL || United Press International

(Source: UPI )
(Source: Quotemedia)

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