Apple Inc on Wednesday, the 2nd of January cut its quarterly sales forecast, with CEO Tim Cook blaming slow sales of iPhone in China. Apple Inc’s economy has been hauled down by uncertainty amidst the U.S.-China trade war.
The company pegged the forecast for the new fiscal quarter at almost US$84bn down from a prior estimate of US$89bn. This is due to their performance at the last fiscal quarter which was below analysts’ estimate of $91.5 billion
The revenue fall accentuates how an economic slowdown in China has been effective than many expected, catching companies in Beijing off balance and compelling some to modify their strategy in the market.
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Apple CEO Tim Cook said in a letter to investors.
“We believe the economic environment in China has been further impacted by rising trade tensions with the United States,” he added.
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The new sales forecast was the first time that Apple had reviewed its guidance to investors for over 15 years. Apple’s shares dropped more than 7 percent in after-hours trade, extending its more than 28 percent slide since November.
Effect of Huawei’s CFO Arrest on Apple Inc Sales
Reuters reported that, Apple finds itself in a complicated state in China, after the arrest of the CFO of the domestic rival, Huawei Technologies Co Ltd in Canada at the request of the United States. China is Apple’s major market and where it assembles most of its signature brands and sells worldwide,
There have been irregular reports of Chinese consumers moving away from Apple products since the arrest although Huawei had been gaining market share over Apple in China even before the unfortunate arrest.
Cook told CNBC that Apple products have not been the target by the Chinese government, however, some purchasers may have decided not to buy an iPhone or other Apple devices due to the firm being an American brand.
“The much larger issue is the slowing of the (Chinese) economy, and then the trade tension that has further pressured it,” Cook said.
Price Tag Issue
Some analysts have pointed out that Apple’s products price is also responsible for the decline in sales in China.
“Apple sales in China have not been doing well for a few quarters now, part of the reason is that their price points have gone too high – past the $1,000 mark,” said Kiranjeet Kaur, an analyst at market research firm IDC.
“(That’s) almost three times as expensive as phones from other vendors that are filling the mass market.”