Apple China bracing for fall

Even as it announces record revenues and net profit, Apple says it has sold fewer iPhones in the first quarter and is bracing for a fall in sales in its critical Chinese market.

“It’s becoming more apparent that there are some signs of economic softness,” says CFO Luca Maestri. “We are starting to see something that we have not seen before.”

He admits the tech giant is working in a “very difficult macroeconomic environment” and projects a further slide in iPhone sales for the second quarter, reports the International Business Times. Apple’s projected revenues indicate the company’s sales are about to fall for the first time in 13 years.

Apple’s sales stumble was masked by the record corporate quarterly profit. Conlumino analyst Neil Saunders takes a close look at the latest Apple report in our international section.

Apple sold 74.8 million iPhones in the first quarter, ending December 26, which is the first full quarter of sales of the iPhone 6S and 6S Plus. The 0.4 per cent growth in shipments was the lowest since the product’s launch in 2007.

Maestri says that although Apple China revenue rose by 14 per cent in the quarter, the company is starting to see a shift in the economy, particularly in Hong Kong.

Apple had record figures in the first quarter for both net profit ($18.36 billion, up from $18.02 billion) and revenue (up 1.7 per cent to $75.87 billion). Greater China accounted for 24.2 per cent of the total revenue, more than all of Europe combined.

An indication of Apple’s popularity in China can perhaps be gauged by the dwindling number of fake Apple stores in the southern city of Shenzhen, some of which have been taken over by unauthorised outlets for local phone brands.

In a street of gadget stores, copycat Apple outlets were not uncommon, complete with the latest iPhone models and accessories and uniformed staff. Only four months there were more than 30, but about a third of these have gone, reports Reuters. Instead of iPhones, some of these shops are now selling Huawei, Meizu, Oppo and Xiaomi phones.

In fact, the iPhone has become a “street cellphone” – a Chinese term that means a widely available and popular product that lacks novelty value.

“Using an iPhone is hardly something you can show off to people now,” a Shenzhen retailer told Reuters.

In the US, iPhones are still popular, and 60 per cent of people who had an iPhone before the launch of the iPhone 6 have yet to upgrade, says the company.

Meanwhile, the Indian market stands out as a rare bright spot for Apple with a growing demand for iPhones, reports The Indian Express.

Sales of the company’s flagship smartphone climbed 76 per cent in India from the year-ago quarter, according to Luca Maestri.

Apple CEO Tim Cook has suggested more growth lies ahead with median age in India being 27 years.

“I see the demographics there also being incredibly great for a consumer brand,” he says. “We have been putting increasingly more energy in India.”

India cannot immediately offset Apple’s woes in China, says analyst Neil Shah of Counterpoint Technology Market Research. Apple averaged about 450,000 smartphone shipments a quarter in India last year, compared with more than 15 million a quarter in China.

Also, nearly 70 per cent of smartphones sell for less than $150, leaving  a slim market for Apple’s high-end phones. Its smartphone market share stands at less than 2 per cent, says Shah.

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