Yesterday, in a letter to investors, Tim Cook, Apple CEO pointed out that iPhone sales that have affected overall revenue in the past quarter have been hampered by the Chinese market. The company’s problems are indeed more serious in China and extend to other markets.
Apple’s competitors from China, including Huawei, are selling more powerful smartphones at lower prices, squeezing Apple’s share. At the same time, according to market estimates, Apple is faltering in India, the untapped largest smartphone market, and its products account for less than 1% of total smartphone sales in this region.
For a company that has seen an 11-fold increase in revenue in the iPhone era, the above-mentioned series of incidents makes Apple a huge challenge. With global iPhone sales stagnating, Apple is unable to rely on large emerging markets to achieve explosive growth, and the company has yet to find a transcendent product that offsets iPhone revenue losses.
On Wednesday, after Cook highlighted the problems in the Chinese market in the revenue report, Apple’s share price fell 10% on Thursday to $142.19, the biggest single-day drop in nearly six years. The company’s market value loss was as high as $74.65 billion.
Some sources said that on Thursday morning, Apple held a plenary meeting at its headquarters in California to discuss issues related to Apple’s performance, including the company’s one-month share price decline. Apple’s reluctance to change the profitability strategy of selling equipment with high prices has aggravated the growth crisis. Analysts say that Apple is not fully aware that their pricing power has weakened in price-sensitive markets, which is the result of lower prices for competitors’ products, lack of compelling new features and slowing of the new Apple products. In China, these problems are more prominent.
For a long time, Apple’s strategy has been considered its biggest weapon – the ability to charge higher prices for its large screen devices. Over the past four years, the average iPhone price has increased by 12% to $749.63 in FY18, which helps to offset the slowdown in sales. According to Wayne Lam, IHS analyst, when Apple said it would stop reporting sales of iPhones and other products, the company meant that sales were not as important as pricing.
Right now, there is a problem with this strategy.