We may only be a few days into 2019, but for Apple, it is already off to a rocky start having lost 9% of their share value on Wall Street. This dramatic drop was a result of the company revealing to their investors that they are going through their first revenue warning since 2002. This decrease in profit has largely been blamed on a lack of sales in China, who are Apple’s third largest market. So what has happened to cause so many people to turn their backs on the technology giant?
There seem to be two main reasons for the decline of sales; political issues as well as their IOS operating system not currently leading in certain markets. Currently, there are ongoing negotiations happening between USA and China that are unlikely to be resolved before March (Guardian). The trade war began following disputes from both countries regarding the tariffs placed on goods. This was accelerated further when the United States filed a request for a consultation to the World Trade Organisation to investigate if China were violating their intellectual property rights. Although a three-month truce on talks was agreed by both parties, this is about to come to an end which will only make the financial markets more unstable. This unpredictable economic landscape is causing a domino effect for consumers in China, with retail outlets reporting less traffic to their stores and less money being spent, especially on smart technology (Guardian).
Another issue Apple faces is the IOS operating system not dominating the market in China. In most Western countries, many users are reliant on Apple’s exclusive services such as iMessage, the App Store and the Apple iCloud resulting in purchases of IOS compatible technology. However in China, the most popular ‘app’ is called WeChat, which can be used to message, access government services and even order a taxi. A specific operating system is not needed, so customers are happy to shop around for alternatives to the iPhone. These often outperform Apple and in some cases are cheaper.
Currently, Apple is the only company to publically declare a revenue warning, but others are likely to be experiencing similar forecasts. With technology not advancing as quickly as it once was, many people no longer feel the need to update their phone as regularly, so smartphone purchases also decreased throughout 2018. Some have even claimed that we had reached the ‘peak’ of smartphone technology (Motherboard). Some may dispute this opinion, as 2019 seems to be the year many are trying something new. LG is one of the many companies who has launched their prototype for ‘folding’ phones. These phones will give flexibility to the trend that bigger screens are better. Samsung is also looking to add an extra camera to their handsets to get ahead of the competition.
So what do you think, will Apple meet the same fate as Nokia or is this just a bump in the road?