Apple’s position in China
Apple’s (AAPL) iPhones declined 15% YoY in the first quarter of fiscal 2019 due to a slump in China (MCHI) (FXI), which is the world’s largest smartphone market. Apple’s revenue declined 26.7% YoY to $13.2 billion in the Greater China region in the first quarter. The decline came after five straight quarters of double-digit revenue growth in the Greater China region, which includes revenues from China, Hong Kong, and Taiwan.
On January 2, Apple’s CEO Tim Cook gave a warning about iPhone sales for the first quarter amid shrinking demand for its newest models and a weakening economy in China. Apple’s weakness in iPhone sales also led to a reduction in the first quarter of fiscal 2019 sales guidance.
Apple’s struggles in China
Apple is struggling with sluggish iPhone demand in China due to economic and industry challenges in the country. The US-China trade war fear has further weakened the demand for iPhones among Chinese consumers. Currently, Apple’s products including iPhones, its smartwatch, wireless headphones, and speakers are exempted from the tariffs. However, any tariff on Apple products imported from China would increase their cost, thus making them more expensive.
Apple is already facing troubles selling its iPhones in China due to their high prices and lack of innovative features in comparison to local players like Huawei, OPPO, and Xiaomi. Local player Huawei Technologies is growing rapidly in China thanks to its new features and reasonably priced smartphones.
Last month, Apple had reportedly announced it would cut its iPhone prices of its latest models including iPhone XR and iPhone XS Max in China. However, the inability to innovate in its models has ruptured Apple’s dominance in the global smartphone market.