Craze for Apple is going down
Apple shares reached the historic $1 trillion market value in 2018 and it is the first publicly traded U.S. company to reach a $1 trillion market capitalization and also the Most Trusted brands in India too is facing tough competition across the globe.
Apple iPhone sales drop 12% to $25.99 billion in third quarter ended in June after dropping 17 percent in the previous quarter, which is less than half of quarterly revenue for the first time in seven years. However, Apple said its services revenue in the fiscal third quarter rose 12.6 percent to $11.46 billion, a new record. China’s consumers are increasingly favoring their domestic brands after the U.S. stepped up its action against Huawei.
This could be because of the trade war and it has reflected from the ongoing nationalist sentiment could play to Huawei’s favour and hurt Apple’s sales in China. Chinese consumers’ love for Huawei can only increase because of the ban in US market. Last year, Huawei shipped 206 million smartphones, 105 million in mainland China, accounting for 26.4 per cent of the domestic market, IDC data shows. In comparison, Apple ranked fifth in the country with a 9.1 per cent share. In the first quarter, that fell further to 7 per cent compared to a 3 per cent share gain for Huawei, according to Counterpoint.
In the first quarter iPhone shipments worldwide fell to 36.4 million units, a 30.2 per cent decline from same period last year. The iPhone struggled to win over consumers in most major markets as competitors continue to eat away at Apple’s market share,” as per the IDC.
China is one of Apple’s biggest markets for the iPhone. Strategy Analytics in its research report said Apple iPhone shipped 38 million units to capture 11 percent global smartphone market share in Q2 2019 as compared with 12 percent a year ago. Whereas, the customers in India and Europe remain challenging for the expensive iPhone, whereas, superior quality of phones are available with much less price. Due to recent events, Apple’s brand image is said to be declining rapidly in China and India too.
Another analysts predict that the iPhone could be one of the victims of the ongoing bitter trade dispute between the United States and China which has already resulted ban on Huawei. Going forward, there would be informal boycott of Apple products by customers in China. This will have a direct impact on iPhone sales in the country and it would surely reflect on Apple’s bottom line. It’s also feared that the Chinese government’s next move in the ongoing trade dispute could result in Apple’s access to the Chinese market being restricted. That would impact the overall sale and production of iPhone.
The trade dispute may compel Chinese citizens to shun Apple products and purchase devices from domestic brands instead, even more so than they already do. Apple reportedly shipped 6.5 million iPhones in China in the first three months of this year. With the new $300 billion tariff on China that may increase Apple’s iPhone production costs to increase to 14%.
Shares of Apple have tumbled in double digit in the past month as trade tensions intensified. As per, Goldman Sachs, that if Apple’s products were banned in mainland China, its earnings could drop by 29%.
Apple has realised on their product expensive and started producing its cheaper iPhone SE models in India, using the manufacturing facility of Wistron, but that’s a long way from Apple moving all iPhone production from China, or its iPad and Mac manufacturing. However, the experts says, Apples will face difficulty in moving iPhone production outside China. The difficulty in finding the eco-system of new component suppliers in a different country.
Apple is considering moving some production from China to avoid the burden of a potential tariff hike from the U.S., The Wall Street Journal reports. At the same time, Foxconn, a major supplier for Apple in China, previously told Bloomberg it has the capacity to build enough iPhones outside of the country to satisfy demand. Now, Apple has to take the call on moving production out of China.
Apple reported a 1 percent rise in revenue to $53.8 billion for the fiscal third quarter ended in June. The revenue for its “Wearables, home and accessories” segment that contains devices like the Apple Watch and AirPods was $5.53 billion. Apple revealed that it generated third quarter sales of $25.056 billion from Americas, $11.925 billion from Europe, $9.157 billion from Greater China, $4.082 billion from Japan and $3.589 billion from Rest of Asia Pacific. China sales fell 4 percent to $9.16 billion and the market share in China declined to 5.8 percent from 6.4 percent, as per Canalys. At the same time Huawei Technologies gained market share to become the top handset seller in the country.
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