The 13-year long growth streak for Apple, Inc. has come to an end with the tech giant reporting declining sales and revenue in its second quarter financial report Tuesday.

Apple reported revenue of $50.6 billion and quarterly net income of $10.5 billion or $1.90 per diluted share for the quarter compared to $58 billion and net income of $13.6 billion or $2.33 per diluted share for the same quarter in 2015.

Gross margin declined slightly to 39.4 percent compared to 40.8 percent in Q2 2015.

Leading the decline for Apple were slowing sales of its iPhone range, with the company reporting sales of 51.193 million units for the quarter compared to 61.17 million in the same quarter of 2015 and 74.779 million in the previous quarter which included the holiday season; money wise revenue from iPhones dropped to $32.857 billion compared to $40.282 billion year-on-year, down 18 percent.

Despite the launch of the iPad Pro, sales across Apple’s tablet range continued to fall with 10.25 million being sold in the quarter, down 19 percent from the 12.623 million sold in Q2 2015.

The decline in sales didn’t stop at Apple’s mobile devices, with sales of its Mac range of computers and laptops also slowing, with 4.034 million units shipping in the quarter, down 12 percent year-on-year.

One of the few bright spots in the figures came from Apple’s “services” category which includes software, app and iTunes sales, as well as Apple Music and iCloud subscriptions, growing 20 percent to $5.991 billion versus $4.996 billion in the same quarter of 2015, while it’s “other” category, which includes Apple Watch, iPod, Beats headphones, Apple TV, AirPort routers, and other accessories, grew to $2.189 billion in revenue, up 30 percent compared to $1.689 billion in Q2 2015.

“Our team executed extremely well in the face of strong macroeconomic headwinds,” Apple Chief Executive Officer Tim Cook said in a statement. “We are very happy with the continued strong growth in revenue from Services, thanks to the incredible strength of the Apple ecosystem and our growing base of over one billion active devices.”

Red storm rising

Tim Cook’s use of strong macroeconomic headwinds may refer to the global economy as a whole, but breaking down the figurse it’s China where the heart of the downturn in Apple sales lies.

Apple sales in China (and related territories including Hong Kong, Macau, and Taiwan) dropped a whopping 26 percent in the quarter.

Weirdly Tim Cook blamed lower sales in Hong Kong for the figure, claiming the local currency peg with the United States dollar made products more expensive to visitors; what Cook is actually referring to there is the devaluation of the Chinese Yuan meaning that the exchange rate to Hong Kong dollars (which are pegged to the U.S. dollar) is making things more expensive for mainland Chinese visitors to the territory.

That may account for part of the drop, but it absolutely makes no sense overall as it ignores the fact that mainland Chinese can buy an iPhone from an Apple Store, or from an authorized Apple reseller in mainland China and are not required to travel to Hong Kong to buy them.

The more likely truth is that the devaluation of the Yuan compared to the U.S. dollar has meant that iPhone’s have become more expensive across all of the China, at the same time that the growth in the country is slowing, making them less desirable across the board, particularly when competitors such as Samsung Electronic Co. Ltd. are actually cutting the prices on their flagship phones.

If the trend in China continues it will be a case of red storm rising for Apple’s financials as the country is their largest market after the United States itself.

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