Trump says he’s unconcerned about Apple’s China sales warning

05 January, 2019, 05:17 | Author: Sally Reid
  • Nobody in China wants Apple's eye-wateringly priced iPhones, sighs CEO Tim Cook

Since becoming Wall Street's first trillion-dollar company back in August, Apple's market cap has fallen by more than $300 billion. He didn't mention that Apple had priced its new models at stratospheric levels.

While President Trump's trade war with China isn't helping Apple and other United States technology companies, Mr Ives believes Apple miscalculated by continuing to roll out high-priced phones in China, creating an opening for rivals with less costly alternatives that still worked well. A year ago was truly a roller coaster for the stock. Tech analysts say local brands like Huawei and Oppo have been closing the gap with Apple in terms of performance and design even while Cupertino continues to raise its prices.

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.

"I think this is probably the first major downgrade that we've seen for fourth-quarter earnings, although I suspect this isn't the last one", he said in an interview. 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".

Now the ongoing trade war between the US and China may be having even more of an impact.

In Asia, some traders cheered a private survey showing that China's services sector expanded in December.

Anything that puts Apple's business in China at risk is a serious concern for investors. According to market researchers with IDC, "worldwide smartphone shipments are expected to decline by 3% in 2018 before returning to low single-digit growth in 2019 and through 2022". First, as my colleague Evan Niu wrote about the smartphone market in December: "What little growth ... is left is being driven by low-priced handsets from Chinese vendors". "There's a hole in Apple's product portfolio - they do not have a low-cost smartphone to fully exploit emerging markets".

Now, this statement about battery replacements having an impact on iPhone sales raises a number of questions. Given spotty coverage in 2019, gambling on a new design before networks are mature could be more risk than reward, said Darryn Lowe, a Bain & Co partner who works with the wireless industry.

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Apple has slashed its Q1 revenue guidance to 84 billion USA dollars, about 9 percent lower than the market's expected target of about 91.3 billion dollars.

"If you look at our results, our shortfall is over 100% from iPhone, and it is primarily in greater China", Cook told CNBC.

Apple undoubtedly has some strong competitive advantages in the marketplace.

"This is more political than it is Apple execution".

In a letter to investors Wednesday, CEO Tim Cook explained that Apple is grappling with several issues, many related to China. If anything, things could get tougher for Apple.

Sacconaghi acknowledged that "a meaningful portion of the China weakness is macro driven", which means there are circumstances beyond Apple's control.

"Until it changes this pricing strategy, it is unlikely to see market share growth and will most likely see a gradual contraction as iPhone users upgrade at slower rates", said Richardson. Suppliers in Asia, including Japan Display Inc. and Minebea Mitsumi Inc., tumbled in Friday trading. Silver rose 0.9 percent to $15.80 an ounce.

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