Apple Inc is blaming falling company revenues on a slowdown in iPhone sales in China, and earlier in the 2019 Apple slashed their quarterly sales forecasts. In the last quarter of 2018 Apple produced $13.2 billion in revenue in China, a deep decline from the $18 billion in 2017’s fourth quarter.
The continual decline in sales has caused analysts to predict a 50% slowdown in Apple sales in 2019. Apple stock tumbled at the beginning of the year but has been slowly recovering in recent months.
Apple CEO Tim Cook blamed the lowering sales in part on China’s economy when he said, “while we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China.”
Not only did Apple not expect China’s economic slowdown to be so drastic, neither did many economic analysts.
Increasing tough talk from the American and Chinese state departments has also caused some uncertainty in the market. Many are worried about a potential trade war between the two economic powerhouses.
Cook also pointed to the trade Sino-American trade tensions as a potential reason behind the slowdown. Cook said, “the much larger issue is the slowing of the economy, and then the trade tension that has further pressured it.”
February was also the worst month for mobile phone shipments in China, furthering concern within the Cupertino-based company. Mobile phone shipments dropped by 20% in February, an already typically weak month for phone sales in China.
China is one of Apple’s most important markets as the country with of 1.386 billion has a penchant for technological gadgets. But combining an economic slowdown with a saturated phone market is bad news for the American giant.
Many retailers already have too many phones in stock, and some stores have even resorted to slashing the price on some Apple products. Analysts have pointed to some of Apple’s shortcomings including their commitment to high-price points as another reason for Apple’s struggles.
Apple has also tried to cut the price of iPhone’s in China in order to generate more interests in their products, but this strategy has not paid off so far. Researchers from Longbow Research said that iPhone searches also dropped 47% in February, indicating that a good deal has not been enough to entice Chinese buyers.
Apple has also had to contend with the growth of Chinese multinational phone company Huawei. Apple’s competition is usually Google’s Android, but in China, the home-grown Huawei is China’s biggest rival.
Huawei has come under fire from the American and Canadian governments, and the Chinese company has been unable to penetrate the American market.
While troubles for Apple’s biggest rival in China might look good for Apple on the surface level, the American company has been wary of the Chinese company coming down hard on the California-based tech giant. So far, the Chinese government has not put any public pressure on Apple, but it relations between China and the US worsen, then Apple could be caught in the crossfire.
The slowing Chinese market has impacted Apple as a whole, and the company is looking to make up the numbers in other ways. The company will likely have to resort to ambitious moves typically uncharacteristic of Tim Cook’s reign at the top of the company.
Some analysts have suggested that Apple should purchase Activision Blizzard, a video game company. Mobile gaming is a huge market, and Apple could stand to increase iPhone sales by releasing their own exclusive games. The best way to carry out this strategy would be to purchase their own video game developer, then Apple could stand to benefit twice in terms of sales.
Apple will need to open up other avenues if it wants to keep revenue high despite the lowering Chinese market, especially as it looks like the company’s problems in the region look to persist.
This is a contribution from Peterleehc.com a solution to startup venture.
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