Apple (NASDAQ:AAPL) will reportedly invest more money in China, as CEO Tim Cook wants to build a research and development center in the country by the end of the year. Perhaps Apple’s investments in China are just a part of diversifying and expanding, but it could also be the cost of doing business in the country.
Although initiatives like the iPhone SE have a lower selling price and therefore lower margins, long-term investors are looking at it as a multi-pronged approach. Gaining market share in these countries, which boast more than 1 billion people, will drive revenues and profits, even if done so at lower margins. Even if this doesn’t lead to selling higher-margin products in the future, the services business is expected to contribute more profits at a higher margin, helping to offset some of the potential profitability compression.
