Segment Information and Geographic Data

The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments.

The Company manages its business primarily on a geographic basis. The Company’s reportable segments consist of the Americas, Europe, Greater China, Japan and Rest of Asia Pacific. Americas includes both North and South America. Europe includes European countries, as well as India, the Middle East and Africa. Greater China includes China, Hong Kong and Taiwan. Rest of Asia Pacific includes Australia and those Asian countries not included in the Company’s other reportable segments. Although the reportable segments provide similar hardware and software products and similar services, each one is managed separately to better align with the location of the Company’s customers and distribution partners and the unique market dynamics of each geographic region. The accounting policies of the various segments are the same as those described in Note 1, “Summary of Significant Accounting Policies.”

The Company evaluates the performance of its reportable segments based on net sales and operating income. Net sales for geographic segments are generally based on the location of customers and sales through the Company’s retail stores located in those geographic locations. Operating income for each segment includes net sales to third parties, related cost of sales and operating expenses directly attributable to the segment. Advertising expenses are generally included in the geographic segment in which the expenditures are incurred. Operating income for each segment excludes other income and expense and certain expenses managed outside the reportable segments. Costs excluded from segment operating income include various corporate expenses such as research and development, corporate marketing expenses, certain share-based compensation expenses, income taxes, various nonrecurring charges and other separately managed general and administrative costs. The Company does not include intercompany transfers between segments for management reporting purposes.

The following table shows information by reportable segment for 2018, 2017 and 2016 (in millions):



	2018		2017		2016
Americas:
Net sales	$	112,093	$	96,600	$	86,613
Operating income	$	34,864	$	30,684	$	28,172

Europe:
Net sales	$	62,420	$	54,938	$	49,952
Operating income	$	19,955	$	16,514	$	15,348

Greater China:
Net sales	$	51,942	$	44,764	$	48,492
Operating income	$	19,742	$	17,032	$	18,835

Japan:
Net sales	$	21,733	$	17,733	$	16,928
Operating income	$	9,500	$	8,097	$	7,165

Rest of Asia Pacific:
Net sales	$	17,407	$	15,199	$	13,654
Operating income	$	6,181	$	5,304	$	4,781

A reconciliation of the Company’s segment operating income to the Consolidated Statements of Operations for 2018, 2017 and 2016 is as follows (in millions):



	2018			2017			2016
Segment operating income	$	90,242		$	77,631		$	74,301
Research and development expense	(14,236		)	(11,581		)	(10,045		)
Other corporate expenses, net	(5,108		)	(4,706		)	(4,232		)
Total operating income	$	70,898		$	61,344		$	60,024

The U.S. and China were the only countries that accounted for more than 10% of the Company’s net sales in 2018, 2017 and 2016. There was no single customer that accounted for more than 10% of net sales in 2018, 2017 and 2016. Net sales for 2018, 2017 and 2016 and long-lived assets as of September 29, 2018 and September 30, 2017 were as follows (in millions):



	2018		2017		2016
Net sales:
U.S.	$	98,061	$	84,339	$	75,667
China⁽¹⁾	51,942		44,764		48,492
Other countries	115,592		100,131		91,480
Total net sales	$	265,595	$	229,234	$	215,639



	2018		2017
Long-lived assets:
U.S.	$	23,963	$	20,637
China ⁽¹⁾	13,268		10,211
Other countries	4,073		2,935
Total long-lived assets	$	41,304	$	33,783


(1)	China includes Hong Kong and Taiwan. Long-lived assets located in China consist primarily of product tooling and manufacturing process equipment and assets related to retail stores and related infrastructure.

Net sales by product for 2018, 2017 and 2016 were as follows (in millions):



	2018		2017		2016
iPhone ⁽¹⁾	$	166,699	$	141,319	$	136,700
iPad ⁽¹⁾	18,805		19,222		20,628
Mac ⁽¹⁾	25,484		25,850		22,831
Services ⁽²⁾	37,190		29,980		24,348
Other Products ⁽¹⁾⁽³⁾	17,417		12,863		11,132
Total net sales	$	265,595	$	229,234	$	215,639


(1)	Includes deferrals and amortization of related software upgrade rights and non-software services.

(2)

Includes revenue from Digital Content and Services, AppleCare, Apple Pay, licensing and other services. Services net sales in 2018 included a favorable one-time item of $236 million in connection with the final resolution of various lawsuits. Services net sales in 2017 included a favorable one-time adjustment of $640 million due to a change in estimate based on the availability of additional supporting information.


(3)	Includes sales of AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch and other Apple-branded and third-party accessories.