Apple CEO Tim Cook has his work cut out in China this year: a sales ban threat, uncertain outcome of trade war talks and rollout of a new 5G network.
shanghai/san francisco — Apple CEO Tim Cook has his work cut out in China this year: the iPhone maker faces the looming threat of a court-ordered sales ban, the uncertain outcome of trade war talks and the roll-out of a new 5G network, where it finds itself behind rivals like Huawei and Samsung.
The complex outlook raises a challenge for Apple as it looks to revive its China fortunes after weakness there sparked a rare drop in its global sales forecast, knocked $75 billion from its market valuation and roiled global markets.
Cook told investors that the main drag on the firm’s performance in China had been a sharper-thanexpected slowdown in the country’s economy, exacerbated by the impact of trade tensions between Washington and Beijing.
“We did not foresee the magnitude of the economic deceleration, particularly in Greater China,” he said.
Chinese shoppers told Reuters another element had been key: the high price tag on Apple’s flagship phones.
Analysts said the firm faced a brewing storm of challenges: an economic slowdown, stronger rivals like Huawei Technologies bringing out comparable tech at lower prices and bubbling patriotic sentiment amid the trade war.
A Chinese court has also issued a preliminary injunction banning some Apple phones, part of a legal battle with chip maker Qualcomm. This ban, potentially hitting iPhone models from the 6S through the X, has yet to be enforced.
On Thursday, a local industry body, the China Anti-Infringement and Anti-Counterfeit Innovation Strategic Alliance, called on Apple to heed the court order and not “trample the Chinese law by leveraging its super economic power and clout”. Apple declined to comment on the group’s statement but has previously said it believes its current phones comply with the Chinese court’s order.
“These are tough times for Apple in China,” said Neil Shah, research director at Counterpoint, adding the iPhone could see its market share slip to 7 per cent this year in the face of stronger local rivals and worry about the sales ban.
Apple’s market share in the third quarter of 2018 was around 9 per cent, and has dipped from above 14 per cent in 2015, overtaken by local rivals like Huawei, Oppo and Vivo.
5G strategy
Another question mark for Apple is its 5G strategy in China, where the US firm is not expected to have a 5G-enabled phone until 2020, behind rivals like Huawei, Xiaomi and Samsung Electronics. China is looking to push ahead with its rollout of a faster 5G network, with a precommercial phase this year and a commercial network in 2020.
Some are looking to make an early bet on the technology. Huawei is planning a 5G phone midyear, while Xiaomi is aiming for the third quarter. Samsung is expected to unveil a 5G phone in the first half of the year.
Industry insiders, however, said Apple would likely hold off until the fall of 2020 to have its own 5Genabled phone, a strategy that would bypass the untested early period of the technology, but which could mean Chinese shoppers delay iPhone purchases or buy another brand that switched to 5G earlier.
“I’ll definitely be paying attention to 5G functionality when I buy my next phone,” said Wu Chengjun, a graduate student in Beijing who currently uses an iPhone X.
With the exception of Huawei, which makes it own 5G chips, Qualcomm is providing the technology to many of the major phone makers releasing 5G handsets this year.
“If you’re a [phone maker] looking for a ‘super cycle’ [of sales], if you don’t have 5G, your situation won’t get any better,” Cristiano Amon, Qualcomm’s president, told Reuters in an interview.
“The carrier channel is going to be incentivized to start selling 5G phones in the second half” of 2019, he said. —
We did not foresee the magnitude of the economic deceleration, particularly in Greater China
Tim Cook, CEO of Apple