The New Yorker: What Apple has to fear from China

“No company wants to report that its sales have declined. But when you’re Apple, which has consistently seen its revenues grow for more than twelve years, it’s not just bad news but a serious kink in a joyful narrative of boundless possibility,” Zachary Karabell writes for The New Yorker. “Earlier this week the company — the most valuable in the U.S. — told shareholders that revenues had declined by thirteen per cent. Apple’s chief executive, Tim Cook, did his best to spin the numbers — temporary currency fluctuations were to blame; sales will rise again as the iPhone SE continues its rollout; the company will rebound thanks to ‘the incredible strength of the Apple ecosystem.'”

“But Cook couldn’t assuage fears about the biggest reason for the revenue decline: a twenty-six-per-cent drop in sales in China, Taiwan, and Hong Kong, accounting for fifty-eight per cent of the over-all decline in Apple’s growth,” Karabell writes. “The company’s stock price promptly plummeted.”

“When China’s economy slows, as it has recently, Apple’s revenues are inevitably hurt. But Apple also got a perhaps more worrisome sign for the long term just days before its quarterly earnings report, when China blocked its citizens from accessing iTunes Movies and iBooks—just the latest move showing that the country’s response to U.S. tech companies’ ambitions will be to fortify its borders. Where much of the planet has embraced the Internet as more or less open and transnational, China is striving to make it closed and national,” Karabell writes. “While China’s move might disappoint some customers, it’s of a piece with its goal of fostering domestic competitors to Apple and its Silicon Valley peers. Last year, Xiaomi, a company barely five years old, sold more smartphones in China than any other company. Estimates place Xiaomi’s valuation at more than forty billion dollars, and its devices aren’t just competing with Apple on price and functionality; they are starting to win the war of cool.”

Read more in the full article here.

MacDailyNews Take: Xiaomi is “starting to win the war of cool?”

Horseshit.

The rest of this specious, uninformed “piece” is equine feces, too.

China has a lot more to lose than they have to gain by “slamming the door on Apple.”MacDailyNews Take, April 22, 2016

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21 Comments

  1. China may have more to lose, but they don’t see it that way. In fact I bet they see it the other way around. They are in an excellent position. A position of strength no matter how you look at it.

    Apple has to go to China to build their products. Apple and every other electronics vendor. China learns from this how to build their own electronics industry. China turns a blind eye to IP theft. Blatant IP theft. Apple and others do nothing because they need those supply and manufacturing and engineering facilities. China blocks the new threat, Internet Services. Keep in mind, the old men aren’t just protecting business, they’re protecting culture and national security as well. They are going to choke the amount of data that goes in and out. The Internet for them will be one big national Intranet. With as little connection to the outside as possible.

    What can Apple do? Move manufacturing elsewhere? Where? Who has the facilities of a Foxconn? Or a Pegatron? What about the global supply chain? The vast majority of Apple’s parts come from China, I mean VAST majority. Heck even Apple’s American suppliers turn around and outsource supply and manufacturing.

    Maybe Apple could relocate to China, become a Chinese company and sell back to the rest of the world. That’s pretty much what they do now.

    MDN you know this stuff inside and out. I don’t see China suddenly turning around and making things easier for Apple, unless some of those billions languishing in overseas banks start greasing the palms of the Communist leaders.

    That comment about cool is not so off base either. Young Chinese people may regard buying Chinese as being “cool” for nationalistic reasons.

  2. random 2 cent thoughts:

    1) article’s not bad but incomplete.
    The companies being targeted are different.
    Apple makes a lot more stuff in China than some of the others like Google so Apple is a key part to China’s economy . Exports are what keeps China alive. Chinese companies like Xiaomi (unlike the article implication that they are very ‘cool’ ) actually don’t sell well overseas.

    WSJ : “Overseas growth also has been slow for Xiaomi, with the percentage of its smartphones sold overseas in the first nine months of 2015 rising to 8%”

    a lot this ‘overseas’ is to other developing or third world countries. Like Chinese cars, penetration into the rich developed world like USA is minimum. So for China to get USA cash it has to keep companies like Apple if not happy at least alive.

    2) there’s huge social historical issues involved which I won’t get into. China’s got 4-5 thousand year history and the biggest fear of EVERY Chinese govt. is unrest among its huge population thus ‘internet censorship’ etc.

    The other biggest fear is point one above : poverty (i.e bad economy) among it’s citizens leading to unrest.

    3) many countries have censorship programs for books. Besides what they consider ‘porn’ (even some romance novels fall there!) some countries ban Mein Kampf or the Bible etc. Chinese authors have also successfully sued Apple as pirate versions of their works have been sold by Apple services. What I’m saying is iBooks is different from Facebook or Google. We’ll wait an see if Tim Cook can work this out with the Chinese govt.

    4) Xiaomi has it’s own problems, internet search it yourself.

    WSJ Jan 2016: “investors are beginning to question its $46 billion valuation, which was based on yet unrealized plans to generate substantial revenue from Internet services.

    China’s economic slowdown, coupled with turbulence in the country’s stock market, is prompting investors to take a second look at China’s high startup valuations”

    5) In scale Xiaomi and Apple are completely different beasts. I don’t latest number but in 2014 Xiaomi made a paltry 56 million in profit.

    CNET : Xiaomi earned 347.5 million renminbi ($56 million) in net profit .

    ( Apple in it’s ‘disappointing’ last quarter made over 10,000 million — 10 billion — , 18,000 million in the christmas quarter )

    Xiaomi’s executives are also proud that they simply copy Apple designs down to the icons. Not saying companies like it are not a threat to Apple in China but I want to remove the impression that journalists give that they are ‘the same ‘ or better (“win the war of cool”) as Apple.

    1. forgot to add this important point:

      Question why doesn’t Govts like USA RETALIATE: i.e if they ban Google ban Xiaomi ?

      I hazard that it’s because the USA govt borrows billions (over a trillion?) from China because of the deficit. First defence against predatory regimes is to clean house and balance the budget. topic is too large but internet search yourself under “Govt. Waste”, in previous posts I’ve cut and paste example of politicians spending $18 on a glass of orange juice for lunch at 5 star hotels to ‘bridges to nowhere’ project contracts for the friends and $50 screwdrivers. Cut waste , don’t borrow and you’re back into path of true power and independence.

    2. “Chinese authors have also successfully sued Apple as pirate versions of their works have been sold by Apple services.”

      That’s precious, ain’t it? I personally know two authors whose works have been blatantly copied and pirated and/or sold in China without any royalties being paid, or even any notice being given. I guess they don’t believe in what’s good for the goose….

      1. piracy is rampant, including music, apps, movies (even Chinese directors complain)

        Apple is big fat target , both for pirates and biased Govt. regulators (who pick on Apple more than other retailers) and also for aggrieved copyright holders.

        so Apple’s got to button down and don’t let the stuff in and my point was if Cook can do this and whatever else that’s in violation maybe he can work it out with the Govt. As for legal content and censorship we’ll have to see what Cook deems Apple is willing to do or not. (like I said countries are all different even sophisticated ones. I remember some European countries cutting out the scene where Luke Skywalker’s hand was cut off as ‘too violent’ for family fare. Some directors would have refused to allow their films to be cut and they won’t be shown… ).

        (not saying the Govt. is fair to foreign companies, so Apple can’t give them excuses. )

      1. Dear lord… here come the grammar Nazis

        DID YOU ACTUALLY HAVE ANYTHING PERTAINING TO THE TOPIC OF CHINA AND APPLE TO CONTRIBUTE ?

        (dear Grammar Nazis in general:
        this a is a forum for entertainment not a business proposal or a Master thesis we’re submitting, please don’t bother us unless it’s so badly written you don’t understand it.

        There is no edit function on MDN, some of us are typing on iOS devices or phones with difficult keyboards and spell checkers that often ‘suggests’ the wrong thing.

        Some of us are used to even abbreviations when we text like “Home 6. xxx”

        I don’t even bother to cap my sentences often.)

        i think most readers with the certain exceptions ( see person I’m replying too) have BRAINS (like they can understand that if I wrote it’s and its was a TYPO…. ? do I need to write a follow up post correction for THAT?)

        Seriously USHER are you one of those poor sods whose mom smacked them because THEY DIDN’T FOLD THE BEDCOVERS JUST RIGHT.. ? Now you want to inflict the pain/anger on everyone else?

        Life is too short dude. .

        1. OOOOOPPPS…

          I wrote: ” iOS devices or phones ”
          which SHOULD BE ” iOS devices LIKE phones ” !!!!

          RUN RUN RUN THE GRAMMAR NAZIS WILL COME AFTER ME FOR SURE NOW!!

          RUN RUN RUN !!!

  3. Mmm the smell of fear yes that’s pretty distinct that great fear that there are those finally waking up and smelling the stench.

    Took a look around to see a bit about this fear that China is reacting to.

    Found a list of the world’s top 10 technology companies at invesiopia: Apple, Alphabet, Microsoft, Facebook, Samsung, Oracle, Tencent, Intel, Cisco, and IBM. One South Korean and one Chinese company, the other 8 from the publication’s home country. Hmm interesting.

    Found a list of the world’s largest information technology countries on Wiki: Apple, Samsung, Foxconn, Amazon, HP, Microsoft, IBM, Alphabet, Sony, and Panasonic. That’s one South Korean, one Tawainese, two Japanese and the other 6 from the publication’s home country.

    Then just for fun, it’s not related in any way more than likely I checked out Global Trade Alert for the 5 most protectionist countries since 2008. China is not even on the list but the publication’s home country is, in fact it’s number one.

    As the article states: “Through that lens, blocking Western content and Western companies is an act of national defense.” though it does not take a stretch of the imagination to see it as an act of planetary defense against those who threaten global security.

  4. Horseshit indeed. As I posted before, these supposed experts seem to believe that Chinese never travel anywhere or buy things abroad to get them cheaper. The reason why sales declined in Hong Kong and rose in Japan last quarter was almost certainly a result of a growing trend of Chinese tourists avoiding Hong Kong and heading to Japan for shopping.

    Xiaomi as cool?! Give me a break. People buy them because they’re cheap, not as a substitute for iPhones. We’ll never know the real total sales figures, because only Apple gives them. Most of the sales numbers in China floating about are dodgy, to say the least, even though the finsncisl press trests them as gospel. The real wannabe Apple is not Xiaomi, but Huawei. They have begun building lookalike stores with an Apple aesthetic and going upscale with their hardware. Buy the reason none of the domestic brands are “cool” is that Chinese consumers love foreign brands for their social cachet, and that is unlikely to change anytime soon. Apple currently has no real rival in China, and the iPhone 7 should once again prove highly popular.

  5. Setting aside the HYsTeRiA…

    The Apple winter quarter is ALWAYS the worst of every year. That is of no surprise seeing as the previous quarter ends with the biggest annual holiday gift-giving season of humanity. Most people have blown their ca$h and take time to recoup their state of debtlessness.

    Therefore: 🍎🐻🐂💩, CU next ¼ !

  6. Zachary Karabell who writes for The New Yorker:
    Estimates place Xiaomi’s valuation at more than forty billion dollars, and its devices aren’t just competing with Apple on price and functionality; they are starting to win the war of cool.

    Hardy Har Har! Cheap, knock-off, good enough for the financially compromised, Android hobbled lame phones being promoted by China’s own criminal, totalitarian government. Wow Zackary. You got suckered.

  7. I’ve lived in China since 2013-2015. Xiaomi is seen as trendy and cool, but not even close to the level as the iPhone. Not even close. It’s seen as a great product for the budget you have.

    1. Well… I own a Mi5 since a few weeks and I ,must say it’s an incredible phone especially for the price.

      My wife got my work phone (iPhone 6S). I don’t need it anymore especially as the Mi5 is dual sim.

  8. People basing their investing options on Apple’s decline in sales from last year are missing a huge point. The iPhone 6 was Apple’s first large screen device, offered in 4.7″ and 5.5″ sizes and Apple spent months after the winter holidays last year filling the pent up demand. There was no way the iPhone 6s updates were going to have that same level of demand. If you take the iPhone 6 data out of the timelines over the iPhone’s sales history, you’ll see the current year’s iPhone sales are on a continuous upward slope. Put the data back in and the iPhone 6 season puts a bump in the sales rise. It’s pretty clear the data traders were simply making the simple year to year compare to short the stock, when sales were actually just fine. A lot of people bought the line, sadly.

    The China political economic situation is troubling and a better reason for concern about Apple’s sales in China. Xiaomi success in China will not be replicated in the U.S. Their phones are clear patent violations of Apple’s technology and they’d have to spend years in court fighting patent violations. They certainly don’t have Samsung’s resources to play that game.

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