iPhone-maker Apple tells investors that it will miss revenue estimates by $9 billion owing to weak demand in Asia, especially China.
Apple might be in a spot of bother due to slowing iPhone sales. In a letter to investors, Apple CEO Tim Cook revealed that the iPhone-maker was witnessing “weak demand” as consumer upgrade cycles are getting longer.
Demand has been particularly low in Greater China, Apple revealed, as the country's economy is slowing and competition from local brands like Huawei is on the rise. Holiday sales have been lower “than anticipated” with customers taking “advantage of the significantly reduced pricing for iPhone battery replacements”, Cook said.
In December 2017, Apple had been accused of discreetly slowing down the performance of older iPhones. Following public outrage, the company slashed the price of battery replacements for out-of-warranty iPhones from $79 to $29 for a one-year period ending December 2018. So,“anyone with an iPhone 6 or later” could get a new battery at under $30, a move that seems to have impacted iPhone sales adversely.
Cook noted that Apple expects iPhone revenues for the first quarter to be $9 billion lower than estimated. Earlier, Apple had told investors that Q1 iPhone sales would be in the range of $89 and $93 billion. This has now been revised to $84 billion. Apple stock was down 10 percent following the announcement.
Tim Cook wrote in his letter,
“Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline.”
He, however, clarified that all other “categories outside of iPhone (Services, Mac, iPad, Wearables, Home, Accessories) combined to grow almost 19 percent year-over-year”.
The emerging market challenge
Apple also admitted that selling newer, pricier iPhones has been challenging across emerging markets in Asia. An uncertain dollar and global currency fluctuations have also hit sales.
Add to that Android’s growing dominance in markets like India, where iPhone’s market share in 2018 declined to 1 percent - “its lowest in recent history” - Counterpoint Research estimated.
A few Indian users took to Twitter this morning to reveal that they were not upgrading to newer iPhones because of their “absurd” prices.
One user wrote,
“Apple has itself to blame. Stop citing 'weak demand', indicating the problem lies elsewhere. Apple has priced itself out of the market. I’ve had an iPhone for long, and it’s time for an upgrade, but the new iPhone prices are just absurd.”
Another user concurred. “I just bought Pixel 3 instead! iPhone prices are ridiculous,” he said. A OnePlus buyer said, “The 6T is an amazing phone, and costs half of an iPhone. There’s no strong case to buy the latest iPhones at all.”
Given that iPhones command the biggest share of Apple's revenue pie, a slowdown there indicates a real problem. Apple needs to fix it soon!