Here is why Apple sales are slowing down
Apple’s mobile phone division, which account for roughly two-thirds of its revenue, seems to have taken a beating due to the economic slowdown in China – the biggest overseas market for the tech firmtech Updated: Jan 27, 2016 16:45 IST
Sales of the iPhone – Apple’s top-selling product – slowed down for the first time since 2007 in the first quarter that ended on December 26, and insiders fear that it may cause the company’s overall revenue to slump in the following quarter.
Apple’s mobile phone division, which accounts for roughly two-thirds of its revenue, seems to have taken a beating due to the economic slowdown in China – the biggest overseas market for the tech firm. Although Apple CEO Tim Cook remains bullish on China, considering the iPhone’s sales performance following the advent of largescreen models, analysts say the newer entries haven’t ignited much enthusiasm among consumers because they incorporate fewer noticeable changes.
“Although we started seeing a slowdown in China in December, we remain very confident in the long-term potential for the Chinese market. Apple remains incredibly strong,” Tim Cook said during the earnings call, adding that Apple was very optimistic about its business. The CEO also referred to other markets such as Brazil, Russia, Canada and Japan, which were also slowing down due to the strengthening of the dollar amid a weak global economic outlook.
However, company CFO Luca Maestri said later on Wednesday that iPhone sales have gone up by as much as 76% in India in recent times. Cook, during the earnings call, said the company was planning to double investments in India and had already applied for a licence to open exclusive retail stores.
Does this mean that India can take China’s spot? It won’t be that easy. Apple’s market share in India is much lower than China – which remains its biggest overseas market.
Also, iPad sales have been declining for two years, and the market share of Mac computers – a recent area of strength – also fell in the same period.
The company, which recently entered the wearables space with its iWatch, does not report watch sales. Apple is also reportedly working on a car, but what it plans to do in that area is still unclear.
Analysts also say that Apple has no big products coming in, which is another reason for the slump in iPhone sales. However, Cook dismissed these insinuations, stating that the company always looked at making it big in the long run. “We don’t live in 90-day quarters, and we don’t invest in 90-day quarters,” said Cook. “I’m so convinced that the things we are doing are right, and the assets we have are enormous.”
The company said it sold 74.77 million iPhones in the first quarter, surpassing the sales of 74.5 million units a year earlier. The less-than-1% increase fell short of analysts’ estimates of 76.54 million units in the quarter.
For the current quarter ending March, Apple said it sees revenue of $50 billion to $53 billion, well below the estimated revenue of $55.47 billion from analysts polled by Thomson Reuters. At the midpoint of $51.5 billion, that would mark an 11% decline from the same quarter a year earlier – the first decline since March 2003.