Published: Sat, January 05, 2019
Money | By Bruce West

Trump Says He's Unconcerned About Apple's China Sales Warning

Trump Says He's Unconcerned About Apple's China Sales Warning

Peter Richardson, a research director at Hong Kong-based Counterpoint Research, said it was hard to see a catalyst that would help Apple recover lost ground in China.

(Motherboard) Wednesday, Apple CEO Tim Cook wrote a letter to investors alerting them that the company would miss its revenue targets in part because Apple didn't sell as many iPhones as it expected. In a press release published while trading in its shares was halted, Apple said it expects revenue of about US$84 billion in the quarter ended December 29.

Originally, Apple had forecast anywhere between $89 billion and $93 billion, while analysts opted for $91.5 billion.

Apple shares slid some 7.6 per cent in after-hours trade on the news. The move led analysts to believe a drop was coming.

The lack of a breakthrough product surely contributed to Apple's not-so-hot outlook.

2 letter to investors, Cook noted that China's reported GNP growth during the September quarter was the second lowest in the last 25 years. On Thursday it was also announced that Apple is likely to remove some iPhones from stores in Germany, as Qualcomm moves to enforce an earlier court order banning the sale of some iPhone models in the country. In late December, the promotional program for the new models went live in China, adding one major perk: users in China cannot only trade in their old iPhones, but also Android phones made by Apple's major competitors in China, including Huawei, OPPO and Xiaomi. "China is the biggest beneficiary of Apple, more than us".

Factors impacting iPhone sales include "consumers adapting to a world with fewer carrier subsidies, USA dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements", Cook wrote.

Toni Sacconaghi of Bernstein Research highlighted in an analyst note that Apple did not outright attribute the slowdown of it's iPhone sales to the smartphones' high price tags.

Companies that make heavy machinery such as construction equipment are facing less demand as China's economy, the largest in the world after the US, loses strength.

China is looking to push ahead with its rollout of a faster 5G network, with a pre-commercial phase this year and a commercial network in 2020. But that was the country's lowest rate of growth since the 2008 world economic crisis. LVMH, the luxury giant that owns Louis Vuitton and has often been used as a barometer for consumer spending in China, said the Chinese were spending "a little bit less".

"It's definitely worrying", said China specialist David Dollar, senior fellow at the Brookings Institution.

But what happens when the Chinese growth juggernaut slows?

Yuan Yuan, a 26-year-old employee of a social media company in Beijing, reflects the pressures on urban professionals squeezed by rising living costs and job uncertainty.

"I have no plans to buy an apartment, a auto or any other major items", Yuan said. "People are anxious about losing jobs", she said.

Apple's decision to wait to adopt 4G until after other makers didn't hurt it. China accounts for one-third of the industry's global handset shipments.

Prices for the iPhone have risen significantly in recent years, and particularly so in the fall 2018 iPhone lineup. Chinese smartphone manufacturer Huawei enjoys a 24.6 percent share.

"I think there are a heck of a lot of USA companies that have a lot of sales in China that are basically going to be watching their earnings be downgraded next year".

Samsung is expected to unveil a 5G phone in the first half of the year.

Like this: