Apple Sees Weaker iPhone Sales Amidst Trouble in China

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Apple sold 5 percent fewer iPhones in the last quarter compared to the same period a year earlier, the company told investors today on an earnings conference call.

iPhone revenue declined even more sharply at 17 percent during the same period. Apple CEO Tim Cook said one of the main reasons for the declines was weaker demand for the iPhone 7 in China, where consumers were quick to upgrade to the iPhone 6s and 6s Plus last year.

"When you look at what happened in '15 in China, we had a surge of upgraders that came into the market for the iPhone 6s and 6s Plus," Cook told investors. That surge was much larger than the demand increase following the iPhone 5s release, he said, and it isn't something that the company was able to replicate with the iPhone 7 and 7 Plus, which were released on Sept. 16.

Why aren't Chinese consumers buying more iPhone 7s? Cook pointed to several reasons, including a challenging foreign exchange rate environment that has resulted in manufacturing supply shortages. His comments suggest Apple thinks supply constraints are more important than softening demand for smartphones, which multiple analysts have predicted this year.

"We are very bullish on China," Cook said. "Looking forward, the response to the iPhone 7 and 7 Plus has been very positive."

He also spoke briefly about the rumors that have been swirling around Apple's ambitions in the self-driving car industry. A report last month indicated that the company "laid off dozens" of people as its car effort shrinks. Cook would only say that Apple sees a lot of promise in self-driving cars.

"We look for ways that we can improve the experiences on different sets of products," he said. "It's clear that there's a lot of technology that will become available to revolutionize the car experience."

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