Good luck in China Apple with the Tech Wars
iPhone saturation, trade war China contraction and what we knew was coming is here, Apple has lowered forecasts.
Apple slashes revenue guidance, says iPhone sales are weak in China — shares tank
When Apple decided to no longer share iPhone sales data to shareholders, it was a huge red flag. Big surprise then, that on January 2nd, 2019 Apple lowered guidance sending its stock down.
With how America has treated Huawei, is it surprising Apple could suffer in China really? Apple’s stock is down nearly 10% today, that’s pretty extreme. Apple has a big China problem, and it’s making investors very nervous. Their guidance wasn’t overly dramatic, but the market is peculiar these days with poor sentiment.
The Demise of a Premium Brand?
But let’s be honest here, Apple’s earnings will be at an all-time high in 2019. And yet, Tim Cook’s letter to investors is/was pretty scary to some. Less traffic in their stores, and China contracting badly starting in November, 2018 were some bad signs for Apple and developed markets in general.
Still we are talking about a company that makes quarterly revenue of $84 billion. With Gross margins of approximately 38 percent! Apple is a beast, even if it has an iPhone China apocalypse.
That Apple even relies on iPhone sales in China is an existential threat at a time when there’s an active trade war/tech war going on. It also makes western markets not see Chinese tech companies in an objective light.
iPhones are Over Priced — Apple is Losing Smart Phone Marketshare
Apple Inc.’s US$1,000 iPhone is a tough sell to consumers in China unnerved by an economic slump and the trade war with the U.S. — it’s also they would prefer to support Huawei a company that symbolizes National zeal in China. Likely what’s happening is that more Chinese consumers are punishing American companies due to the trade war itself that is hurting China economically.
Apple is Failing in China
- Apple lowered revenue guidance to $84 billion, down from the $89 billion to $93 billion it had previously projected.
- Marketshare loss in China is has been on-going and is inevitable in China for iPhones.
- The iPhone10 was only modestly success and the weight of having no compelling innovation taking place is worrisome for Apple.
Apple’s Stock is Losing Momentum
The elephant in the room is that Apple is dependent on the Chinese consumer. Apple devices are too expensive for young global citizens in many regions.
- Apple has lost $446 billion in market capitalization since Oct. 3.
- The stock is plummeting with the FAANG correction of late 2018
Apple is in serious trouble and it’s bringing down the NASDAQ today with it.
Apple is Failing in Innovation
There have been several reports pointing to weak iPhone sales in recent months. Some Apple suppliers cut their estimates last quarter, leading many to speculate consumers weren’t upgrading to the new models so this is hardly surprising.
The Board must push for innovation — even if Apple has done well with software services, its AppleWatch, it seems to have slowed down in Artificial Intelligence and R&D in recent years.
Apple has not been very honest with how vulnerable it is with shareholders and its being punished by investors recently for that. The idea that a CEO must make the company “look good” at all costs is really not in tune with the transparency required in volatile markets like these.
iPhone sales must have done horribly in Single’s Day (double 11), and Chinese consumers must be punishing U.S. brands that are too expensive for the trade war. The idea that consumers in 2019 will upgrade their iPhones is almost absurd.
Don’t even try and get back into China Google, let the Chinese internet do its thing without your talent grabs. China, whether you agree with it or not is showing it will contribute to the public interest in terms of innovation and with its own companies.
Apple Blaming Macro Factors is Dishonest (it has internal issues)
Apple blamed a variety of factors for the lowered guidance, including a weakening economy in China and lower-than-expected iPhone revenue. Apple needs to do the math of its own failure in innovation, and wake up to the fact it cannot rely on the hype of iPhones forever.
However you want to look at it, it’s Apple’s worst day in 6 years. iPhone sales could be down up to 14–20% YOY in 2019 I predict. China isn’t just an outlier event, Apple wants to blame “Chinese Nationalism” for Apple’s decline there but that just scratches the surface.