Post by The Big Daddy C-Master on Aug 1, 2016 23:25:04 GMT -5
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Apple Inc. (AAPL) has a China problem. Even as CEO Tim Cook touts the potential for sales to consumers in the world's second-largest economy, growth is slowing down. (See also: Why Apple Can Become a Value Stock But Not a Defensive Stock.)
Slowing China Sales
Apple suffered a steep 33 percent decline in revenues to $8.85 billion from $13.23 billion in China from the same period a year ago. According to the latest report from research firm Canalys, the company’s ranking in the Chinese market has slipped to fifth behind local smartphone makers. Apple now trails Huawei, Oppo, Vivo, and Xiaomi.
Apple’s China problem is explained by a complex market and increased competition. The Chinese market is large enough to contain the two broad ends of quality-conscious customers and competitive pricing. Samsung Electronics and Huawei, which primarily makes phones using the Android operating system, have focused on price-conscious customers.
Apple's Market Dilemma
Apple was firmly placed in the premium-quality and price end of the market. However, the emergence of players like Xiaomi has muddied the waters. This is because these companies offer features or capabilities similar to or more advanced than that of the iPhone at much cheaper prices. (See also: China Orders Apple to Stop Selling Iphone.)
Xiaomi was the first company to eat into Apple’s market share while Oppo and Vivo, two local brands, have stepped in to take its place. Along with Huawei, China’s biggest smartphone company by sales, they have begun launching phones with features, such as dual lens cameras and bright OLED screens, not available in current versions of iPhones.
Apple has been hit by two other problems. First, China’s increased focus on cybersecurity has translated into a ban on the company’s iBooks and iTunes movie streaming services. That should not translate into a significant headwind for the company as sales for both services, since they started operations in China, were in “millions of dollars,” according to CEO Cook. Second, the company is suffering from the adverse effects of a strong dollar. In January this year, the company said a strengthening dollar cost $5 billion in revenues to the company.
Apple Inc. (AAPL) has a China problem. Even as CEO Tim Cook touts the potential for sales to consumers in the world's second-largest economy, growth is slowing down. (See also: Why Apple Can Become a Value Stock But Not a Defensive Stock.)
Slowing China Sales
Apple suffered a steep 33 percent decline in revenues to $8.85 billion from $13.23 billion in China from the same period a year ago. According to the latest report from research firm Canalys, the company’s ranking in the Chinese market has slipped to fifth behind local smartphone makers. Apple now trails Huawei, Oppo, Vivo, and Xiaomi.
Apple’s China problem is explained by a complex market and increased competition. The Chinese market is large enough to contain the two broad ends of quality-conscious customers and competitive pricing. Samsung Electronics and Huawei, which primarily makes phones using the Android operating system, have focused on price-conscious customers.
Apple's Market Dilemma
Apple was firmly placed in the premium-quality and price end of the market. However, the emergence of players like Xiaomi has muddied the waters. This is because these companies offer features or capabilities similar to or more advanced than that of the iPhone at much cheaper prices. (See also: China Orders Apple to Stop Selling Iphone.)
Xiaomi was the first company to eat into Apple’s market share while Oppo and Vivo, two local brands, have stepped in to take its place. Along with Huawei, China’s biggest smartphone company by sales, they have begun launching phones with features, such as dual lens cameras and bright OLED screens, not available in current versions of iPhones.
Apple has been hit by two other problems. First, China’s increased focus on cybersecurity has translated into a ban on the company’s iBooks and iTunes movie streaming services. That should not translate into a significant headwind for the company as sales for both services, since they started operations in China, were in “millions of dollars,” according to CEO Cook. Second, the company is suffering from the adverse effects of a strong dollar. In January this year, the company said a strengthening dollar cost $5 billion in revenues to the company.
