IPhones: Is China Ap­ple’s only prob­lem?

The Week (US) - - News -

China’s econ­omy is slump­ing, and Ap­ple is feel­ing the pain, said Jack Ni­cas and Keith Bradsher in The New York Times. Ap­ple shook Wall Street last week by an­nounc­ing it was miss­ing sales ex­pec­ta­tions for the first time in 16 years, largely due to a de­cline in iPhone sales in China. It “was the clear­est con­fir­ma­tion yet that the Chi­nese econ­omy is in se­ri­ous trou­ble.” China is Ap­ple’s third­biggest mar­ket af­ter the U.S. and Europe, ac­count­ing for $52 bil­lion of Ap­ple’s an­nual sales—mostly iPhones. But wealthy con­sumers in China are tight­en­ing their belts. Ex­pen­sive restau­rants in Bei­jing and Shang­hai sit empty, and room rates at five-star ho­tels “sud­denly tum­bled in De­cem­ber.” Auto sales have fallen by record per­cent­ages in re­cent months. “Ap­ple is a bell­wether,” says one econ­o­mist, and if peo­ple aren’t buy­ing iPhones, “that’s a pretty good sign they’re hav­ing a hard time.”

Yes, Ap­ple is “sput­ter­ing” in China, said Yoko Kub­ota in The Wall Street Jour­nal— but not just be­cause of the econ­omy there. “Once a top seller in China, Ap­ple has slipped to the fifth-big­gest phone seller in that coun­try, trail­ing four do­mes­tic pro­duc­ers.” China’s users rely less on Ap­ple’s apps and more on China’s own “chat, pay­ments, and so­cial me­dia app” WeChat. Com­pa­nies like Huawei, Oppo, and Vivo ap­peal to lo­cal preferences, for in­stance with high-tech cam­eras op­ti­mized for self­ies. There’s an­other rea­son Ap­ple’s sales are slump­ing, and not just in China, says Brian Bar­rett in Wired.com: Cur­rent phones “can per­form ca­pa­bly for years— and con­sumers are fi­nally get­ting wise.” In the U.S., smart­phone users used to up­grade roughly ev­ery 24 months; that’s now up to 35 months. So Ap­ple has been hurt by the dura­bil­ity of its own prod­ucts.

All of Ap­ple’s ex­cuses just show that

“China may be the new ‘weather’—a go-to ex­cuse for com­pa­nies whose sales aren’t up to snuff,” said Shira Ovide in Bloomberg .com. We’re see­ing the op­ti­mistic story about Ap­ple’s per­pet­ual growth “fall­ing apart in front of our eyes.” Ap­ple’s iPhone busi­ness has hit “lower gear” be­cause most peo­ple who want iPhones al­ready have them. This was pre­dictable, and so were the prob­lems in China. Ap­ple CEO

Tim Cook claimed two months ago that Ap­ple’s Chi­nese busi­ness was “very strong,” de­spite ob­vi­ous signs oth­er­wise. “Ap­ple failed in the No. 1 mis­sion of be­ing a pub­lic com­pany: be­ing hon­est with in­vestors about its busi­ness.” Steve Jobs would have done it dif­fer­ently, said John Gru­ber in Dar­ingFire­ball.net. “De­liv­er­ing bad news was one area where Steve Jobs re­ally shined.” He told peo­ple that Ap­ple might have a bad quar­ter, but it still beats the rest of the in­dus­try. “Ap­ple needs less ‘I’m sorry, let me ex­plain,’” and more re­minders that de­spite a dumb trade war in China, iPhones “still ac­count for 90 per­cent of the prof­its in the en­tire hand­set in­dus­try.”

In China, do­mes­tic brands dom­i­nate.

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