Published: Sat, January 05, 2019
Finance | By Jaime Brady

5 takeaways from Apple's stark China warning

5 takeaways from Apple's stark China warning

The company (AAPL) announced on Wednesday that investors should expect lower revenues than those projected for the last quarter because sales in China were below those anticipated.

In a letter to investors, Apple CEO Tim Cook pointed to a slowing economy, particularly in China.

The Dow Jones Industrial Average plunged 650 points on Thursday morning as Apple stock plummeted and Facebook, Amazon and Alphabet dropped about two percent.

The stark acknowledgment from the premier US tech company is sending reverberations throughout global markets and even led Citi to ask an existential question: "What if China Sales Went to Zero?" "Build those plants in the United States.'.China is the biggest beneficiary of Apple, more than us, because they build their product mostly in China".

"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. Indeed, in fiscal 2018, the company derived $51.9 billion from the region - a whopping 20% of its total revenue.

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Any new product offering from Apple is unlikely to be revealed before September, when the company traditionally unveils its new iPhones. Increasingly high prices could have also played a role.

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These analysts said that while Apple's services business jumped 27.5% year over year to $10.8 billion in December, they "are quite concerned that Services growth is going to slow meaningfully beginning in the March" quarter.

Qualcomm, which requested the ban, said last month that the Fuzhou Intermediate People's Court ordered four Apple subsidiaries to stop selling older models of the iPhone, including the 7, 7 Plus, 8, and 8 Plus.

As worries have mounted in recent months, top financial regulators have held meetings with economists at banks and brokerages to instruct them to take into account the interests of the Communist Party when they publish economic analyses - an apparent euphemism for holding back alarming language, Bloomberg reported in November.

Apple's share of China's smartphone market has dwindled over the past three years and is expected to fall further as demand for expensive iPhones continues to erode.

Economic experts have blamed Chinese consumer concerns on the country's tariff dispute with the United States as well as an increase in news about falling automobile and real estate sales in China.

"If I have more money to spare, maybe I won't hesitate to buy the latest iPhone", Zhu said as he brandished his bezel-less OnePlus 6, which, except for the logo, looked nearly exactly like an iPhone.

"I think there are a heck of a lot of USA companies that have a lot of sales in China that are basically going to be watching their earnings be downgraded next year until we get a deal with China". More maneuvers like this from other companies could significantly impact the revenue Apple gleans from its app store.

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