Plummeting Apple sales in China have prompted the company to warn shareholders of a US$5 billion hole in its first-quarter revenue forecast.
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Apple CEO Tim Cook wrote in a letter to investors.
“In fact, most of our revenue shortfall to our guidance, and over 100 per cent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad,” he said.
The Apple sales decline in China, Hong Kong and Taiwan would most likely exceed $4.3 billion, roughly equal to the company’s overall drop in revenue.
Previously, Apple had forecast revenue of between $89 billion and $93 billion. Now it expects the figure will be closer to $84 billion, but notes final figures will not be calculated for several weeks.
Cook said the rising tension between the US and China played a part in the declining sales, with traffic to Apple stores in the region declining as the quarter progressed. This, in turn, led to lower than expected iPhone revenue in the region, which was compounded by the stalling iPhone upgrades seen in other markets.
“We believe there are other factors broadly impacting our iPhone performance, including consumers adapting to a world with fewer carrier subsidies, US dollar strength-related price increases, and some consumers taking advantage of significantly reduced pricing for iPhone battery replacements,” Cook explained.
In response to these trends, the business is seeking to make it easier to trade in used iPhones at Apple stores, as well as allow payments to be made over a longer period.
“This is not only great for the environment, it is great for the customer, as their existing phone acts as a subsidy for their new phone,” Cook said.
Despite the slowing traffic, Apple’s other categories grew over the period, with the company’s wearables category growing by almost 50 per cent due to the popularity of Apple Watch and AirPods.
