What’s Eating Apple? Tech Company Blames China for Sagging iPhone Sales and Tumbling Share Prices
Apple CEO Tim Cook's letter to investors spooked investors. But despite the warnings, the tech company is still poised for success. (Photo: Stephanie Keith/Getty Images)
When Apple CEO Tim Cook wrote a letter warning investors to expect lower revenue in the company’s first quarter of 2019, he wasn’t implying that the company was going out of business.
But when Cook made public his downgraded expectations, the fallout from the financial press suggested that the smartphone giant was in grave trouble. And that’s simply not the case.
Investors panicked and the resulting sell-off saw Apple stock tumble mightily. On Jan. 2, 2019, APPL was trading on Nasdaq at 157. The next day it was down to 144, wiping $450 billion from the company’s market value, which had been as high as $1.1 trillion in 2018.
While investors always overreact to bad news, there does seem to be more to this downswing than a few jittery punters losing their nerve. A growing number of analysts are now predicting that this could be the beginning of the end of Apple iPhone’s decade-long run of dominance.
Here are some reasons they’re using to support that claim.
The worsening economic situation in China
In his letter, Cook placed most of the blame for lagging iPhone sales on the economic situation in China. China’s economy is struggling. The country’s stock market lost US$2.3 trillion in 2018, its poorest performance in a decade and many people may be forgoing the expensive iPhone for one of the many cheaper models on the market. “Over 100 percent of our year-over-year worldwide revenue decline occurred in Greater China,” writes Cook. The unspoken worry is that if China’s economy continues its downward trend, it could cause a global recession, which would further dent sales.
Simmering trade tensions between U.S. and China
The effects of Donald Trump’s global trade wars is not only being felt in Canada, but also other parts of the world, including China. In his letter, Cook cites “rising trade tensions with the United States” as a reason for the company’s poor performance in the world’s largest market. CNBC’s Jim Cramer suggests that many Chinese are choosing to buy Huawei phones instead of Apple as a patriotic gesture. In China, says Cramer, “the Communist Party doesn’t want you to buy Apple.”
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