Why Apple’s China problem is likely to get much, much worse

“Apple is coming off a 26 percent sales decline in Greater China, the steepest drop among its five regions,” Ari Levy reports for CNBC. “More worrisome: The greatest risks lie ahead.”

“That’s the view of a growing chorus of experts and prognosticators concerned about the unpredictability of the Chinese government,” Levy reports. “Earlier this month, China shut down iTunes Movies and iBooks just six months after Apple introduced the services there. Billionaire investor Carl Icahn told CNBC Thursday that he sold his Apple shares because, ‘You worry a little bit — and maybe more than a little — about China’s attitude.'”

“Analysts from UBS and Goldman Sachs have published recent reports discussing China’s potential power to thwart Apple’s growth, and Eurasia Group founder Ian Bremmer said earlier this week that China is very likely to limit Apple’s access to the country’s consumer base,” Levy reports. “Looking at its rivals, it’s clear that history doesn’t favor Apple.”

Read more in the full article here.

MacDailyNews Take: The hits just keep on comin’.

16 Comments

  1. Regarding: “Apple is coming off a 26 percent sales decline in Greater China, the steepest drop among its five regions,”

    Yes and the year before there was sales INCREASE of 81% for Greater China. There is a theory that the iPhone 6 created a massive spike in pent-up demand because of the two new larger form factors. This demand drained much of the demand for the iPhone 6s series.

      1. I don’t see Apple setting up a large assembly operation similar to Foxconn in any other country. I think it’s much more likely that Apple will go down the route of robotic assembly and end up with multiple factories operating in different countries with relatively small workforces.

        With robotic assembly, if the trading or operating environment changes in a given country, maybe for political, climatic or economic reasons, then the option exists to relocate the robots elsewhere. You can’t do that with people.

    1. You can’t just blame the analysts for Apple’s share price decline. Investors should have a mind of their own. The big investors don’t see Apple as a good investment so they won’t touch the stock. I don’t buy stock because of some stupid analyst’s prediction. I’d rather listen to Apple’s quarterly reports and guidance than rely on analysts predictions. Look at all those high price targets that Apple never even got close to before crashing. Analysts can’t be trusted. Last quarter’s guidance was low and turned out worse. I didn’t expect Apple to do well and so I wasn’t that shocked with the results.

      I’m mainly disappointed that Apple wasn’t able to figure out a contingency plan for decreased iPhone sales when they should have enough money to work something out. Of course, it’s probably not that easy to do but Apple doesn’t SEEM to be thinking ahead. Why doesn’t wealthy Apple have the most advanced robotics assembly? Maybe a robot can’t yet do what Apple requires of it. Humans likely still have an edge.

      It’s not the end of Apple but I think Apple’s value will continue to drop if things remain the same. I suppose it had to happen eventually if Apple is like most companies. They can’t stay on top forever.

      1. I agree Apple should be pushing alternate growth besides services (which are a good thing to do, but not Apple’s best area).

        They should be hammering the market with Mac updates, cheapers (but quality, high margin) Macs, and Mac marketing.

        Macs have huge headroom to grow, iOS is a great halo for them, IBM and Enterprise are adopting Macs, gaming on Macs has never taken off yet, and Microsoft has been fumbling mobile and desktop OS updates to the turn of $ billions in losses, write offs, and sales decreases.

        It is time for Apple to double, triple, quadruple Mac sales!

        Instead? We get slow hardware updates and a “pro” device that isn’t pro. Come on Apple, the Next Big Thing and big revenue opportunity is Macs!

  2. The sales is “greater China” were likely considerably better than clueless analysts can feebly reason. Ask yourself why was it that sales in Japan actually *went up*, unlike the rest of Asia? Could it just be that all those Chinese tourists eschewing now unpopular Hong Kong instead went to Japan and bought Apple products along with those famed toilet seat covers? And by the same logic, might not the relatively good sales in Eutope, compared to the Americas, be at least partly explained by the hordes of Chinese tourists buying there? In short, Chinese purchases appear to have been dispersed geographically and hence the reduction in “China” less than might first appear.

  3. Apple should definitely have a contingency plan when it comes to Communist China. They are not our friends afterall. To think they are going to be fair is a fools game.

  4. Plus, there’s been much garbage reporting on the closing of the iTunes Store and iBook store in China. These were the first foreign media entities along with Disney allowed to operate in China at all and only opened six months ago or so, doubtless after a prolonged debate skiing the various Chinese ministries, which how disagree with each other behind the scenes. The new internet publication law, which went into effect from March this year, and under which Apple’s servers were legally shut down was apparently circulating for msny months before it was promulgated, and scuttlebutt is that the ministry of trade and commerce opposed it behind the scenes as being non-compliant with China’s WTO obligations. The hardline faction won out and Apple will now likely have to find a legal way to restore service, probably involving a domestic entity suitably registered, but Apple is not without its supporters, especially since Foxconn us the largest employer in China with over 1 million workers in s rather lackluster economy. Also, Apple’s problems with the film store were likely brought to a head by the PRC government attempts to ban a Hong Kong independent film, Ten Years, having a dystopian, anti-mainland plot, but highly popular in Hong Kong, where it won a prize as film of the years. Apple is legally allowed to sell this film in their HK iTunes Store, given the separate legal jurisdiction, but so doing likely peeved the mainland authorities, who view the film as seditious, into punishing Apple operations on the mainland.

    In short the situation is full of nuances never discussed by the hysterical, clueless western press. Apple’s position is not nearly as bleaknas the financial press morons would have you believe.

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