Apple is the Most Profitable Tech Company in China Thanks to iPhone

Apple has become the most profitable tech company in the entirety of China, beating local giants like Alibaba and Tencent thanks to the market dominance of the iPhone — reports the Financial Times.

According to data from S&P Global Market Intelligence, Apple racked up operating profits of a whopping $31.2 billion in China during its fiscal 2022. Meanwhile, China’s largest domestic tech companies, Tencent and Alibaba, trailed behind with $15.2 billion and $13.5 billion, respectively, in operating profits for their most recent 12-month periods.

Not only is China the largest manufacturer of iPhones, accounting for about 95% of global iPhone production, but it has also become one of Apple’s largest markets. The iPhone was once eclipsed by homegrown smartphone maker Huawei in the Chinese market, but a series of U.S. sanctions have since crippled the local company and put Apple on top.

“Today, Apple has much of the $600-and-above market to itself,” said Archie Zhang, an analyst at Counterpoint Research. “If you’re going to buy a $1,000 smartphone, there’s nothing else.”

What’s more, Apple has struck up a cozy arrangement with Beijing that allows it to enjoy China’s cost-effective labour and factories while the government cracks down on homegrown tech companies.

However, Apple’s reliance on China for manufacturing has proven to be a double-edged sword as of late. Ever since the pandemic hit, factory closures and COVID-19 prevention measures across China have wracked Apple’s supply chain.

Most recently, the Chinese city of Zhengzhou, home to the world’s largest iPhone factory, went into a COVID-19 lockdown.

Apple on Sunday announced that the facility “is currently operating at significantly reduced capacity,” lowering the supply of the company’s latest iPhone 14 Pro models and affecting shipments during its high-volume holiday quarter.

China has also often dictated Apple’s direction in product design. According to a person familiar with Apple’s Chinese operations, the iPhone’s adoption of bigger screens, more advanced cameras, and dual-SIM support were all encouraged by Apple’s Chinese employees, based on the desires of the Chinese market.