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Apple is finally seeing iPhone growth in China, though it may not last

  • Canalys projects that iPhone shipments grew to 11 million units over the past quarter, up from 8 million units a year earlier.
  • Apple's last earnings report showed a 10 percent revenue decline in greater China.
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When Apple reports quarterly earnings later this week, there may be a surprising bright spot: China.

According to estimates from Canalys, Apple's smartphone shipments to China increased to 11 million units from 8 million a year earlier, due to lower prices on older iPhones. The jump follows six straight quarters of declines.

China has become one of the most competitive markets in the world for smartphones. In August, Apple reported that sales in greater China dropped 10 percent from the prior year.

While Chinese brands like Huawei, Oppo, Vivo and Xiaomi have struggled to gain traction in the U.S., they all outpace Apple in terms of units sold in China, according to Canalys estimates. Chinese consumers also use apps like WeChat to perform some of the functions of Apple's operating system.

Apple, which reports fiscal fourth-quarter financials on Thursday, typically breaks out revenue by region, but for the number of devices sold, it provides only a global figure.

CEO Tim Cook said a year ago that China would be a key to Apple's growth going forward. Earlier this year, the company promoted Isabel Ge Mahe to a new position as Apple's vice president and managing director of greater China, reporting directly to Cook and Chief Operating Officer Jeff Williams.

"We are very bullish on China," Cook said on the fourth-quarter earnings call last October. "We continue to see a middle class that's booming there."

However, Canalys is skeptical that its forecast of almost 40 percent growth in iPhone units in China is sustainable. One reason is that the company is entering the highly competitive holiday season with a brand new phone -- the iPhone X -- that's expensive and reportedly facing supply issues.

"Apple's growth this quarter is only temporary," Mo Jia, an analyst at Canalys wrote. "While the iPhone X launches this week, its pricing structure and supply are inhibiting."

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