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Apple is trying to steal business from China’s homegrown smartphone players

05 January, 2019, 05:20 | Author: Sara Gill
  • Apple Earnings Warning

The rare revenue warnings from Apple suggested weaker-than-anticipated sales of iPhones and other gadgetry, in part because of trade frictions between Washington and Beijing. "You have to be a little more cautious, and you have to be a little more defensive until we get further clarity and further visibility in the situation and it just seems like that's not going to come anytime soon".

"I think there are a heck of a lot of U.S. companies that have a lot of sales in China that are basically going to be watching their earnings be downgraded next year until we get a deal with China".

The S&P 500 index plunged almost 2.5 percent and the tech-heavy Nasdaq lost more than three percent. -China trade war - and the stock plunged more than 8% in early trading on Thursday. Cook warned that the company's latest revenue guidance would be lowered to $84 billion. China's Caixin Services PMI, a survey of service industry purchasing managers, had a reading of 53.9 in December, a six-month high. "As growths in China and Eurozone have been clearly slowing, investor fears that moderating global demand will start to dampen US growth momentum", she added. "They want to see the economy slow down, but they don't want to see it slow down too much".

Investors were also unsettled by a report Thursday that showed signs of weakness in USA manufacturing.

Even the devices Apple already makes in India - the iPhone SE and iPhone 6S - are out of reach for most people. IHS Markit's USA manufacturing purchasing managers' index was 53.8 in December, the lowest reading in more than two years, and down from 55.3 in the previous month.

"I think the main villain is the very high prices that Apple is charging for its new iPhones", said Richard Windsor, a technology analyst who writes the Radio Free Mobile blog. "They're definitely having difficulties in China but we've seen this movie before and they tend to have hard quarters and recover and come back from that". Apple had plenty of time to find another cash cow, and it didn't.


Apple's market share in the third-quarter of 2018 was around 9 percent, and has dipped from above 14 percent in 2015, overtaken by local rivals like Huawei, Oppo and Vivo.

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. The Nasdaq fell 83 points, or 1.2 percent, to 6,582. The Shanghai Composite rebounded 1.4 per cent to 2,497.80.

Gold climbed 0.8 percent to $1,294.80 an ounce.

"The knee-jerk reaction is that it will influence trading", said David Katz, chief investment officer at Matrix Asset Advisors.

Apple, indeed, has been hammered by China's lackluster growth and economic uncertainty posed by president Trump's tariff war.

Apple declined to comment on the group's statement but has previously said it believes its current phones comply with the Chinese court's order.

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