Apple has reduced its revenue expectations for its most recent quarter. This is the first time the company has done this in 16 years.
Apple attributed this decision to slow sales in China. This was an unexpected turn of events for the American company but for many economists, it’s a glaring sign of the slowing Chinese economy. Beijing is dealing with an escalating trade war with the US and analysts warn that these factors could wreak havoc on global financial markets.
But some analysts were quick to note that there’s no evidence that problem affectes all smartphone makers -- it’s entirely possible this could be an issue specific to Apple. After all, the American company has had to compete on equal footing with a number of local Chinese manufacturers such as Huawei, Xiaomi etc. Additionally, over the last few years, global smartphone sales have been declining. Many people are taking longer to replace their phones now. These factors could have also played a role in Apple’s predicament in China.
Despite this surprising announcement, Apple still remains one of the most successful companies in China. The company has opened over 40 stores in the country and has reported millions of device sales over the last few years. China is also Apple’s third largest market with a gross total of $52 billion in sales in the most recent fiscal year. With these kinds of numbers, it’s very clear to see why slowed sales in the country are a major concern for the smartphone maker. Apple says that it’s expecting revenue in the quarter that just ended on Sunday to drop by 5% compared to the projected figures.
The company still maintains that the reason why sales have declined is due to the “deceleration of the Chinese economy.” In a statement sent to investors by the company’s CEO Timothy Cook, the company admitted that even though it had foreseen a few challenges in emerging markets, the magnitude reported so far has been totally unexpected. Cook also noted that the trade tensions between the US and China may have served to worsen the situation in what was already a very difficult economic environment.
The revenue warning sent Apple shares tumbling by 7%. This means that the company’s total value dropped to $700 billion. The drop is specifically interesting since Apple was the first company to hit $1 trillion in valuation. This did not happen a long time ago and the continuous dive has been unprecedented. Apple has done well to navigate the political waters of China, since Beijing is not known for its openness. Many foreign companies had to jump through massive hoops to get any meaningful foothold in China but Apple has managed to really do this very well and the goal for the company now is to ensure this decline is reversed as soon as possible.
Apple is also seeing limited progress in its global sales with recent figures showing that the growth has stagnated when it comes to iPhone sales. In contrast, Huawei, the Chinese smartphone maker and Apple’s main competitor in China, reported a 33% jump in its global sales under the same period.