(Yicai) Aug. 2 -- Apple said revenue in China, the iPhone maker’s third-largest market, fell 6.5 percent in the June quarter from a year ago mainly because of the foreign exchange rate.

Revenue in China was USD14.7 billion in the fiscal third quarter ended June 29, the California-based tech giant said in an earnings report published yesterday. The figure fell 8.1 percent in the previous quarter.

“If you look at it on a constant currency basis, we declined by less than three percent,” Chief Executive Tim Cook pointed out on an earnings conference call. “So over 50 percent of the decline year over year is currency related. That is an improvement from the first half of the fiscal year, and so we’re happy to see the acceleration.”

Apple dropped out of the top five smartphone sellers in China for the first time in the second quarter, according to International Data Corporation. The California-based firm slashed the prices of some iPhone models by up to CNY2,300 (USD320) to fend off cheaper products from local rivals such as Huawei Technologies and Vivo Communication Technology.

“We continue to be confident in the long-term opportunity in China,” Cook said on the call. “I don’t know how every chapter of the book reads but we’re we’re very confident in the long term.”

While iPhone discounts may help boost Apple’s sales this quarter, its future success hinges on maintaining relatively low development costs for artificial intelligence and making sure any new AI functions lure price sensitive consumers to upgrade their devices, according to US market research firm Emarketer.

R&D expenses rose 8 percent to USD8 billion last quarter, Apple said, without disclosing how much went on AI, which also includes areas essential for the training and operation of its large language models.

Global revenues rose 5 percent to USD85.8 billion in the three months, while net income gained 8 percent to USD21.5 billion from USD19.9 billion. Chief Financial Officer Luca Maestri said he expects similar revenue growth this quarter.

Handsets remain Apple’s key business segment, but their share of total sales has slid to about 46 percent. Ipad sales jumped 24 percent to USD7.2 billion, while services accounted for USD24.2 billion, up 14 percent.

The iPhone 16 series, Apple's next generation of smartphones set to launch in September, will likely see a robust upgrade cycle, according to analysts.

Shares of Apple [NASDAQ: AAPL] closed 1.7 percent down at USD218.36 in New York yesterday.

Editor: Maritn Kadiev