Apple Suppliers Cutting Sales Forecasts Amid 'Extraordinary' Decline in Chinese Demand

[Baymowe335]

But, that's the issue all companies have to plan for: will trade issues subside?

There is no easy way for a corporation to predict what will finally happen with the trade talks, because even when official representatives and proxies of the Trump Administration say one thing, the President has not hesitated to reverse what has been negotiated. So does Apple, who admits they underestimated the current economic climate (costing shareholders substantial loses) assume the worst or assume the best case scenario? From reports (cutting expectations, slowing hiring), Apple is preparing for the worst. Many of their suppliers are going to do the same.

China 'roaring back' means that they will be allowed to continue to have the success with exports they previously enjoyed and I don't see that being something the Trump Administration will look favorably on.

2019 is a bust and it'll probably carry over into 2020. There are too many major events going on, all putting downward pressure on the global economy. It happens. But one of Apple's specific problems is they are heavily dependent on the iPhone, and if they don't properly address the challenges they currently are facing, and will be facing over the next 2 or more quarters, they could see their standing, brand, and reserves impacted negatively.

I don’t think Apple is “waiting” for anything. They are going to try to execute regardless, but resolving it as soon as possible will help everyone and Apple in particular.

There is no choice but to solve it. It’s just a matter of when, but it can certainly take too long.

Shareholders don’t lose or gain anything real until the stock is sold. You can’t book the gains Until you sell, so you certainly shouldn’t worry about paper losses. Stocks go up and down. A lot of stocks went down and are recovering. The story at Apple isn’t appreciably different than it was 3 months ago. Truth is, the stock basically went straight up for 5 months.

 

[jeremiah256]

Don't forget the Consumer side of the coin, with consumers demanding that companies "innovate" year after year after year, all the while ignoring the amazing innovation that is already occurring. Consumer expectations have gotten way out of hand!

Today's phones are expensive because they are extremely advanced, complex pieces of tech that we take for granted.

I don't think it's fair to outsource this blame to consumers. The connected toilets and such being pushed at CES are not being demanded by consumers. If you blame anyone, blame tech media and Wall Street.

The consumer wants to see progress, but whether that progress is 'innovative' or just normal evolution of the tech, they really don't care. In fact, if Apple had just made normal upgrades on their various Mac line of products, many consumers on this site would have been very happy.

 

[dampfnudel]

Apple told us this is almost entirely a China story and they weren’t lying. This doesn’t surprise me. Apple is doing well in many markets, including major developed markets like the US, Canada, and many places in Europe.

All you hoping for price declines likely won’t get them, but China might.

The competition in China is absolutely insane and competitors are making almost no margin.

So then consumers in other markets will have to subsidize Chinese consumers by accepting even higher prices? The market here is beginning to speak clearly that the prices are too high in addition to the Chinese. Either Apple innovates more or they’ll be forced to reduce their prices in other markets as well.

 

[jeremiah256]

I don’t think Apple is “waiting” for anything. They are going to try to execute regardless, but resolving it as soon as possible will help everyone and Apple in particular.

There is no choice but to solve it. It’s just a matter of when, but it can certainly take too long.

Shareholders don’t lose or gain anything real until the stock is sold. You can’t book the gains Until you sell, so you certainly shouldn’t worry about paper losses. Stocks go up and down. A lot of stocks went down and are recovering. The story at Apple isn’t appreciably different than it was 3 months ago. Truth is, the stock basically went straight up for 5 months.

You are assuming many things, including that buying and selling are the only activities shareholders (individuals and organizations) perform with their shares, but let's not go down that irrelevant road.

Apple is demonstratively worst off than they were 3 months ago. So is almost anyone else. There's no shame in it, and I don't understand why or how anyone would try and argue anything different.

 

[Ankou_Sabat]

I don't understand the disconnect when the average China income is 21,586.95 yuan (3,185.37 United States Dollars) how they expect radical sales of a $1000 phone and blame China & Trump.

 

[Cyrax]

The iPhone 7 Plus, announced in late 2016, was $799 and maxing out at $969. The iPhone XS Max starts at $1099 and goes up to $1449. So about 35%-50% price hikes in two years. During those same two years, Chinese manufacturers have made massive gains and can now produce beautiful high-end phones with great build quality for $400-$500. And this year just happens to be the one where iPhone demand is collapsing.

When the iPhone came out in 2007, it was priced too high, and Apple slashed the price within months, even if it meant egg on their face. It's a bit disheartening to see current Apple leadership see such an obvious rebuke of their price hikes yet turn around and try to blame external factors. The problem is so obviously the high prices.

The fact is that even if the trade war ended tomorrow, China is not buying iPhones as long as they can get really good Chinese-made phones for a third of the price. The value isn't there anymore.

 

[Soccertess]

i don't get something. All these Apple die hards praised Tim and gave him credit for being a great leader and used revenue increases as proof of his excellence (when all he did was be the person at the top when Apple went into China)

but now that revenue is declining, is he still the best CEO ever? I remember someone on here telling me that Tim did more for Apple than Steve.....

 

[Baymowe335]

You are assuming many things, including that buying and selling are the only activities shareholders (individuals and organizations) perform with their shares, but let's not go down that irrelevant road.

Apple is demonstratively worst off than they were 3 months ago. So is almost anyone else. There's no shame in it, and I don't understand why or how anyone would try and argue anything different.

I don’t agree, at all. However, I am admittedly a long term bull. Earnings are still growing, the consumer is strong, and short term trade disputes don’t change business in the long run. Markets are also 15% higher than they were on Christmas after so many overreacted.

I put my money where my mouth is too. In addition to buying stocks all the time, I bought a lot more Christmas Eve.

The only thing related to Apple is the revenue shortfall from earlier guidance. That was bad news. It was mostly limited to China which I believe to be a short term problem almost entirely related to the trade dispute and nationalism. I might be wrong, but Apple the business in insane. There are plenty of numbers supporting that along with an attractive valuation.

Apple also needs to tweak their China strategy, AT LEAST during this dispute. I’m confident in Apple’s ability to execute because they basically have every quarter for 15 years.

 

[Ankou_Sabat]

i don't get something. All these Apple die hards praised Tim and gave him credit for being a great leader and used revenue increases as proof of his excellence (when all he did was be the person at the top when Apple went into China)

but now that revenue is declining, is he still the best CEO ever? I remember someone on here telling me that Tim did more for Apple than Steve.....

Alone neither is the best CEO, they needed each other to balance out to be the best. Tim is a pure numbers, logistics, business person who knows and is excellent at that but he balanced out and was balanced out by Steve Jobs. Tim on his own can only maximize what Apple currently had for so long without innovating anything new or having a clear direction. This was bound to happen sooner or later. Steve needed a Tim and Tim needs a Steve.

 

[Yojimbo007]

*

To blame the economy is a cheap excuse for not looking at the real reason: Apple isn’t giving its customers value for money anymore. For the price of the iPhone X you can have two flagship phones from any other brand.

Apple needs to out innovate or half the prices to give customers a reason to buy or stay at Apples brand.

Loyalty has its limits so does greed.

Its not just about the phone....(though i think iphone x series are the most beautiful and highest quality phones out there, by far.. they are just gorgeous)
It is the Apple ios and the ‘whole ecosys’! To me that is a huge part of the value and the premium im willing to pay.
Two androids dont and wont makeup for that !

 

[ntlman]

I think if the trade tensions subside, China will roar back and everything will be fine.

China is not in a recession. They are still growing, but not as fast. I think American companies are frowned upon at the moment and it’s not good for Apple in China. I think it’s short term.

I do think Apple needs to react in China and I believe they are so that. The numbers are strong elsewhere, so probably just keep pushing sales hard until the facts change.

Sorry, this is not even close to true.

From Bloomberg today,

• Total debt relative to national output surged to 253 percent in mid-2018, from only 140 percent a decade earlier
  • No emerging economy since the 1990s has had such an outsize debt expansion and escaped some sort of financial calamity. China would have to defy history to dodge a debt disaster.
• They might have up to $6 trillion in hidden debt
• Total productivity growth in China has been negative since 2012

These were not caused by trade tensions.

 

[Radon87000]

It’s the damn pricing. iPhone XS Max starts at $1100 while the Note 9 is selling at $700 and that has expandable storage. From a neutral perspective the Note 9 is the bang for your buck buy. The XR and XS are inferior to Note 9.

 

[jm001]

There's just a glut of smartphones out there all doing basically the same thing. A lot of gimmicks and not much innovation. There's some innovation out there, but usually not worth switching phones or upgrading unless you've got an older phone 2 or 3 models removed. It doesn't help that the iPhone has split itself into several models that all basically do the same thing. Maybe release a new model every 2 years instead of every year and put bit more focus on the OS.

 

[Woodcrest64]

There's just a glut of smartphones out there all doing basically the same thing. A lot of gimmicks and not much innovation. There's some innovation out there, but usually not worth switching phones or upgrading unless you've got an older phone 2 or 3 models removed. It doesn't help that the iPhone has split itself into several models that all basically do the same thing. Maybe release a new model every 2 years instead of every year and put bit more focus on the OS.

Yeah I agree. For day to day use they all do the same thing really. Only real improvements now are the cameras and even then it takes 2-3 generations to see a sizeable upgrade now. Another focus seems to be drive for all display no notch phone, but that doesn’t really change the user experience all that much.

It be nice to see some innovation regarding battery technology.

 

[bladerunner2000]

We could blame the trade war, and wiggy is an easy target, but these phone prices have gotten out of hand and competition is making better devices for most people. Maybe wall st and its companies need to stop being such greedy jerks?

LOL, you think the line is drawn for them being greedy jerks when an iPhone gets overpriced? THAT'S what it took for you to be outraged over wall st. greed?

 

[HOTBOBA]

While price plays a role, I'll argue that Chinese domestic brands have become VERY competitive with what iPhones used to offer exclusively. Flagship Chinese phones look good, are built well, and are fairly fluid functionality-wise. Plus there are a plethora of choices to go with. None of my relatives and friends in China are boycotting Apple.

 

[User 6502]

other product lines get maybe 1-2 years between refresh cycles (others 2x-3x that) I dont see the issue with Apple doing 1.5-2 year between iPhone releases. they're kind of stagnant at this point and I have not upgraded to any of the new X versions, not bad phones just seem forced and way too expensive even on a upgrade plan.

I see a HUGE issue with it, as it would reduce sales and revenue even further. They have to innovate more rather than less I’d they want to have a chance to recover.

 

[ksec]

I wonder if there's real "Apple boycott" happening in China, as previously reported. When traditionally nationalist countries like them claim something like it, they really stand behind it. I hope it isn't one of those things.

Yes, but that is not the sole reason. The lack of spending is a problem, especially in luxury. So it hit Apple the hardest. Apple is expecting a 50% YoY decline in china, so say 25% due to boycott and 25% just macro problems.
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So then consumers in other markets will have to subsidize Chinese consumers by accepting even higher prices?

Where did you get the idea other market is subsidising China?
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While price plays a role, I'll argue that Chinese domestic brands have become VERY competitive with what iPhones used to offer exclusively. Flagship Chinese phones look good, are built well, and are fairly fluid functionality-wise. Plus there are a plethora of choices to go with.

We will have to see how well they do without the cheap capital given out. So their real test has yet to come.

 

[colmaclean]

XS in every sense of the word...

 

[Steve121178]

I wonder if there's real "Apple boycott" happening in China, as previously reported. When traditionally nationalist countries like them claim something like it, they really stand behind it. I hope it isn't one of those things.

There's no boycott. They are just buying Android devices which does everything the iPhone does (and more) at a fraction of the cost.

Apple stood still while the rest of the industry progressed.

 

[bchreng]

It’s the damn pricing. iPhone XS Max starts at $1100 while the Note 9 is selling at $700 and that has expandable storage. From a neutral perspective the Note 9 is the bang for your buck buy. The XR and XS are inferior to Note 9.

It’s rumored (and highly likely) that Samsung’s upcoming generation of Galaxy and Note phones are going to see a significant price hike too.

 

[Ramchi]

Poor trade war being used as an excuse for decline in sales of $1500-$2000 mobile....this is the price points only three years refresh MBP can sell well....
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It’s the damn pricing. iPhone XS Max starts at $1100 while the Note 9 is selling at $700 and that has expandable storage. From a neutral perspective the Note 9 is the bang for your buck buy. The XR and XS are inferior to Note 9.

Just recently bought Note 9 512 GB for $950. Even iPhone XS Max 256 at $950 wouldn't look attractive for me.iOS dual SIM implications lack dual WhatsApp and dual iMessages, also the actual screen size is lesser than stated one in the spec, also there is no notch, as you have mentioned expandable storage option...

 

[kis]

Apple told us this is almost entirely a China story and they weren’t lying. This doesn’t surprise me. Apple is doing well in many markets, including major developed markets like the US, Canada, and many places in Europe.

Can't speak for the US or Canada - but they lost Europe years ago and with the latest "more of the same, but a crapload more expensive" releases they're also losing even the most loyal Apple countries like Switzerland. Apple's market share, both for phones and computers, has declined sharply over the few years. They're now at around 25% for phones (down from 32% before they launched the 2018 models) and 4% for computers, down from 60% for phones and around 12% for computers just a few years back. Most other European countries don't have the financial power to afford those insane prices and haven't had that for years anyway.

Of course all Apple products also cost significantly more here than in the US, for no reason other than Apple being greedy.

Europe is a much harder market as well, though, as there's simply much more competition. Huawei has become very strong and with their flagship phones costing about 1/3 less than what Apple offers and packing a lot more tech, it's hard to really recommend an iPhone to anyone here now.

Computer-wise Microsoft is the new Apple here, it's that simple.
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Poor trade war being used as an excuse for decline in sales of $1500-$2000 mobile....this is the price points only three years refresh MBP can sell well....
[doublepost=1547800053][/doublepost]

Just recently bought Note 9 512 GB for $950. Even iPhone XS Max 256 at $950 wouldn't look attractive for me.iOS dual SIM implications lack dual WhatsApp and dual iMessages, also the actual screen size is lesser than stated one in the spec, also there is no notch, as you have mentioned expandable storage option...

Made the same switch and haven't looked back since. Plus got the Pixel 3XL from work as my main phone, which is equally great.

 

[Romeo_Nightfall]

Chinese are just smart with their money.....

thats the real reason, they have perverted the average western to a buying piggy ... eastern seems a little bit more sane!
as i always state, the iphone since the 4s has no real feature which makes it better or greater. touch id or face id is a nice convenience feature but other than that, just incremental ...

 

[Heat_Fan89]

Apple is finding itself in the transition of smartphones from luxury devices to commodities. You can get a perfectly serviceable device for under $500. If you don't need top end performance there are decent alternatives under $300 that will last a couple of years for most consumers.

You can get a perfectly serviceable phone nowadays for around $250. I recently purchased a Huawei Mate SE from Amazon for $229. The phone looks and feels Premium.

It has a 5.93” FHD+ screen, 4GB RAM, 64GB storage, dual sim support, unlocked, microSD supported, FM Radio. The phone comes in Space Grey and you would have to do a double take to realize it’s not an iPhone 8+. It’s super fast and even came with a free clear silicon case.