Apple Planning a Second R&D Center in All-Important China

The plans for a new R&D facility in Shenzhen come as the company continues to try to bolster its market share and sales in the country.

Apple, China, R&D center, research and development, iPhone 7, Huawei, Oppo, smartphones

Apple has unveiled plans for a new research and development center in Shenzhen, China, the second such announcement since the company said it will build an R&D facility in Beijing back in August.

The planned R&D center is aimed at helping the company expand its reach and sales in the huge Chinese economy and to directly challenge Chinese smartphone makers such as Huawei, Oppo and Vivo, according to an Oct. 12 story by Reuters.

Plans for the Shenzhen facility were unveiled by Apple CEO Tim Cook during a meeting with senior officials from the city while he was attending an innovation event in China, according to a report from the Shenzhen Economic Daily.

Shenzhen is important to Apple because many of its products are manufactured there, the story said. The Beijing R&D facility was announced in August as Apple's first such center in China.

An Apple spokesman could not be immediately reached for comment by eWEEK.

In a statement received by Reuters, an Apple spokesman said the R&D center in Shenzhen will be opened in 2017 "so our engineering team can work even more closely and collaboratively with our manufacturing partners. The Shenzhen center, along with the Beijing center, is also aimed at strengthening relationships with local partners and universities as we work to support talent development across the country."

China is Apple's second-largest global market behind the United States and has long been seen as a place where it could increase revenue due to a large pool of customers and economic growth in recent years. Apple has been garnering more and more of its revenue from China the last several years, according to the company's revenue reports. The company began selling iPhones in China in October 2014, after gaining government device security approvals.

Creating a deeper relationship and larger potential market in China is important to Apple as it works to recharge sales of its flagship iPhone models amid several recent quarters of slower sales.

In July, Apple reported third-quarter revenue and net income that fell for the second consecutive quarter as it earned $42.36 billion in revenue, down 15 percent from $49.6 billion a year earlier, and $7.8 billion in net income, a drop from $10.7 billion.

Apple's year-over-year declines in revenue and net income for two straight quarters contrast with the company's prior string of 13 years of quarterly revenue reports without a decline, dating back to 2003. Bringing that streak to a halt, the company reported revenue of $50.6 billion in the second quarter ended in April, 13 percent lower than the $58 billion the company posted a year prior.

The company's third-quarter revenue of $42.36 billion did, however, beat the $42.1 billion estimates of an average of 36 analysts surveyed by Thomson Reuters.

Hitting the company's revenue and net income hard was a 15 percent drop in global iPhone sales to 40.4 million units in the quarter, down from 47.5 million in the third quarter of 2015. Sales of iPads dropped 9 percent to 9.95 million from 10.9 million a year prior, while Mac sales fell by 11 percent to 4.3 million from 4.8 million one year prior.

Apple's revenue from U.S. sales fell 11 percent in the quarter to $18 billion from $20.2 billion one year ago, while its revenue in China dropped 33 percent to $8.8 billion from $13.2 billion in the third quarter of 2015.

The decline in iPhone sales that began in the second quarter had its roots in the first quarter of the year, when Apple sold 74.7 million iPhones, which was essentially flat from the 74.5 million sold in the same quarter a year earlier. In the fiscal first quarter, Apple's revenue was riding high at $75.9 billion, a new Apple record at the time. The company's first-quarter net income was $18.4 billion, which set another quarterly record, up from $18 billion in the same period a year earlier. Earnings rose to $3.28 per diluted share, up from $3.06 in the same quarter in January 2015.