Apple will continue to expand its presence in China.
The tech giant on Friday announced plans to open new research-and-development centers in Shanghai and Suzhou, China. The news comes several months after Apple announced that it will also open research-and-development centers in Beijing and Shenzhen and will invest more than 3.5 billion yuan ($507.1 million) on research and development work in China. All four centers will open later this year, the company said.
China has proven to be a concerning problem for Apple (AAPL) and its investors. The market is one of the most lucrative in the world, and its growing consumer base is critical to Apple’s business. However, Apple’s China sales have fallen in recent quarters, prompting some investors to wonder whether the company is losing the huge market.
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During Apple’s first fiscal quarter, which ended Dec. 31, Apple’s Greater China unit generated $16.2 billion in revenue, a 12% decline compared to the same period in 2015. The company has experienced similar declines in previous quarters.
In an earnings call with investors last year, Apple CEO Tim Cook tried to allay fears that Apple is losing the Chinese market by saying that the revenue declines were due in part to currency fluctuations.
But Apple’s biggest problem in China, he said, is its own success.
“The largest [problem] in our view is that when you look at what happened in 2015 in China, we had a surge of upgraders that came into the market for the iPhone 6 or iPhone 6 Plus, and the upgrade rate increased relatively more in Greater China than elsewhere around the world,” Cook said, according to Seeking Alpha’s earnings call transcript. “And so when that upgrade rate in fiscal year 2016 returned to a more normal upgrade rate, which would be akin to what we saw with the iPhone 5S as a point, it had further to fall.”
Cook added that he’s “very bullish on China” over the long term.
Apple’s R&D investments in China are the result of that expectation of growth. In a statement in October when the company announced its Beijing and Shenzhen centers, Apple said that the facilities should allow its engineers to “work even more closely and collaboratively” with its manufacturers.
Apple added at that time that the centers will also deepen its relationship with local universities and their students. The company echoed that sentiment in its statement on Friday and said its connection to universities will help its Chinese business “flourish.”
