iPhones: Is China Apple’s only problem?
China’s economy is slumping, and Apple is feeling the pain, said Jack Nicas and Keith Bradsher in The New York Times. Apple shook Wall Street last week by announcing it was missing sales expectations for the first time in 16 years, largely due to a decline in iPhone sales in China. It “was the clearest confirmation yet that the Chinese economy is in serious trouble.” China is Apple’s third-biggest market after the U.S. and Europe, accounting for $52 billion of Apple’s annual sales—mostly iPhones. But wealthy consumers in China are tightening their belts. Expensive restaurants in Beijing and Shanghai sit empty, and room rates at five-star hotels “suddenly tumbled in December.” Auto sales have fallen by record percentages in recent months. “Apple is a bellwether,” says one economist, and if people aren’t buying iPhones, “that’s a pretty good sign they’re having a hard time.”
Yes, Apple is “sputtering” in China, said Yoko Kubota in The Wall Street Journal—but not just because of the economy there. “Once a top seller in China, Apple has slipped to the fifth-biggest phone seller in that country, trailing four domestic producers.” China’s users rely less on Apple’s apps and more on China’s own “chat, payments, and social media app” WeChat. Companies like Huawei, Oppo, and Vivo appeal to local preferences, for instance with high-tech cameras optimized for selfies. There’s another reason Apple’s sales are slumping, and not just in China, says Brian Barrett in Wired.com: Current phones “can perform capably for years—and consumers are finally getting wise.” In the U.S., smartphone users used to upgrade roughly every 24 months; that’s now up to 35 months. So Apple has been hurt by the durability of its own products.
All of Apple’s excuses just show that “China may be the new ‘weather’—a go-to excuse for companies whose sales aren’t up to snuff,” said Shira Ovide in Bloomberg.com. We’re seeing the optimistic story about Apple’s perpetual growth “falling apart in front of our eyes.” Apple’s iPhone business has hit “lower gear” because most people who want iPhones already have them. This was predictable, and so were the problems in China. Apple CEO Tim Cook claimed two months ago that Apple’s Chinese business was “very strong,” despite obvious signs otherwise. “Apple failed in the No. 1 mission of being a public company: being honest with investors about its business.” Steve Jobs would have done it differently, said John Gruber in DaringFireball.net. “Delivering bad news was one area where Steve Jobs really shined.” He told people that Apple might have a bad quarter, but it still beats the rest of the industry. “Apple needs less ‘I’m sorry, let me explain,’” and more reminders that despite a dumb trade war in China, iPhones “still account for 90 percent of the profits in the entire handset industry.”