Tim Cook blamed an economic downturn in China
06 January, 2019, 20:09
The company shares fell 7.7 per cent in after-hours trading, so Apple is now worth less than $700 billion.
The price gap is one reason Huawei surpassed Apple in smartphone sales from April through September a year ago to seize the No. 2 spot behind industry leader Samsung, according to the research firm International Data Corp. Experts say many Chinese consumers are likely to reject Apple'siPhone price increases and instead buy less costly models from competitors.
The CEO would go on to point to the ongoing trade war between China and the Trump administration as further hurting its sales, claiming that "mounting uncertainty" about the economy in China was keeping people out of its stores.
"I think the main villain is the very high prices that Apple is charging for its new iPhones", said Richard Windsor, a technology analyst who writes the Radio Free Mobile blog.
Apple cut its revenue guidance for its fiscal first quarter of 2019 to $84 billion, down from guidance of between $89 billion and $93 billion previously.
Apple said it now expects revenue of around $84bn, down from an earlier estimate of between $89bn and $93bn.
Apple's rare admission on Wednesdaycited steeper-than-expected "economic deceleration" in China and emerging markets and noted that trade frictions between Washington and Beijing were taking a toll on its smartphone sales.
Wednesday was the first time that Apple issued a warning on its revenue guidance ahead of releasing quarterly results since the iPhone was launched in 2007. Of all companies tracked, Apple had the highest net in-flow for the day. Best Buy Co. fell 3.8 per cent while Target Corp. slid 1.2 per cent.
"While macroeconomic challenges in some markets were a key contributor to this trend, we believe there are other factors broadly impacting our iPhone performance, including consumers adapting to a world with fewer carrier subsidies, USA dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements".
Nationalistic sentiment was likely intensified by Apple apparently ignoring a Chinese court-ordered ban on iPhone sales in a case involving USA chipmaker Qualcomm, according to the analyst.
A slew of brokerages had reduced their first-quarter production estimates for iPhones after several makers forecast weaker-than-expected sales, leading some market watchers to call the peak for iPhones in several key markets. But Cook has said that the country lacks the skilled labor needed to manufacture those products.
That all came before the damage to the Chinese economy from trade tensions with the United States and long-simmering structural issues became evident.
When Apple sales started falling in China in 2016, Apple executives gave every excuse in the book, including slower economic growth in the country. The iOS developer community in China is among the most innovative, creative and vibrant in the world.
Now the ongoing trade war between the US and China may be having even more of an impact.
One thing Cook didn't mention in his letter is Apple's declining market share in China and the rise of domestic rivals like Huawei and Oppo.
Apple Inc. shares fell almost 10 percent by market close on January 3, following a press release issued by CEO Tim Cook after market close the previous day.
But some investors were heartened by Apple's plans on using its cash pile. Oppenheimer restated a "neutral" rating on shares of Apple in a research note on Monday, October 1st.
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The court has also determined that Apple is liable for monetary damages in an amount to be determined at a later time. An employee of German Apple retailer Gravis displays an iPhone 7 and 8 in a store in Berlin on January 3, 2019.