Apple's stark warning may be ominous news for China

Image Source Saim_Ray010 Reddit

Image Source Saim_Ray010 Reddit

"While Greater China and other emerging markets accounted for the vast majority of the year-over-year iPhone revenue decline, in some developed markets, iPhone upgrades also were not as strong as we thought they would be", Cook said.

Cook told CNBC that Apple products have not been targeted by the Chinese government, though some consumers may have elected not to buy an iPhone or other Apple device because it is an American company. Price rises in some countries have put off consumers, and iPhone owners have refused to upgrade, partly because of Apple cutting the price of replacement batteries that have extended the life of their older phones. Some of the company's iPhones have passed the $1,000 mark while Chinese brands look to fill the mass market. China is Apple's third-largest market after the United States and Europe.

Apple shares dropped nearly nine percent on Thursday, falling to their lowest amount since April 2017, the Wall Street Journal reported. "We grew 16%, which we're very happy with. iPhone in particular was very strong, very strong double-digit growth there'". The company also sees the traffic to retail stores and partner sellers in China declining in the quarter.

After Asian markets tumbled overnight and European exchanges stumbled, USA futures were trading lower on Thursday morning, dragged down by Apple's stunning announcement Wednesday. "We have underestimated the strength of the economic downturn, especially in China", wrote Tim Cook.

Under the new guidance, Apple says revenue will be around $84bn, well short of the $89-93bn range Apple had estimated and a sizeable drop from the $88.3bn revenue haul Apple reported in Q1 FY 2018.

While Cook said the main factor for the weakening iPhone demand is the trade war between the United States and China, many believe the high prices of the 2018 iPhones are actually what convinced many potential buyers to hold on to their purchases.

Analysts see iPhone's high price point and lack of major updates as the major reasons for the Chinese market's lukewarm reaction to its new iPhone releases.

In the latest fiscal year, ended September 29, unit sales of the iPhone were essentially flat from the prior year, while iPhone revenue expanded 18 percent to $166.7 billion. In pre-market trading, shares were also down about 9%. "Apple innovates like no other company on earth, and we are not taking our foot off the gas".

Shares of Apple suppliers plunged Thursday after the tech giant said revenue for the holiday quarter would be lower than anticipated.

That's a huge problem: China makes up about 20% of Apple's revenues globally. Companies such as General Motors, Caterpillar and Daimler have all said recently that trade tensions and slower growth in China are damaging their businesses.

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