A Rotting Apple

It seems Apples shares have taken a little nose dive, as poor iPhone sales in China prompt Apple to lower its quarterly revenue forecast.

It’s the first time in over a decade that this has happened- and it’s slashed the value of both Apple’s shares, and the shares of Apples suppliers.

Apple’s CEO Tim Cook looks toward the Trade War for answers, blaming Apple’s slowing growth on China’s struggling economy.

He’s referring to the trade war that’s underway between China and the USA, led by the Trump administration.

The trade war in a nutshell: Trump has levied high tariffs on hundreds of products sold between the USA and Asia, in a bid to bring the power back to the States.

In Trumps eyes, the whole malarkey is doing ‘GREAT THINGS FOR THE COUNTRY’.

But for others, things are not so great: the changes are putting a chill over the Chinese economy, and the struggle is starting to show up on the balance statements of Apple, and beyond.

Stocks in Silicon Valley, automakers in Detroit and retailers on fifth avenue- are all showing cuts to their sales forecasts.

In a letter to shareholders, Tim Cook notes how the drop in revenues were unprecedented, writing that:

He ‘did not foresee the magnitude of the economic deceleration, particularly in Greater China’.

But whilst tariffs and trade wars have made the hammer heavier, critics have been betting on Apple’s decline for a rather long time.

In 2016, we saw apples sales and profits take a dip, prompting discussion over the possibility we might be ‘apple’d out’.

That year, Tim Cook oversaw the release of a bevy of new products. The Apple Watch, the iPad pro, new iPhones, and a selection of new M

acbooks.

But the clamour over the gadgets wasn’t nearly as impressive as previous years- the sense of ‘excitement’ was, just, absent.

Whilst Cook has managed to keep the market value climbing post-Steve Jobs death in 2011- innovation has been on the slow side without Job’s master-brain.

Apple’s most successful product, is, without a doubt, the iPhone, but, unfortunately for Apple, the smartphone market is growing exponentially- with new players entering in full strength.

Therefore, slower sales in China can be illustrated using a simple and rather obvious formula, which I’ll explain to you now.

(China’s struggling economy) + (the prevalence of low price, high end smartphone alternatives (See the thriving domestic market leader Huawai)) = (poor sales for Apple in China).

And given the size and activity of the Chinese tech market, this is bound to have a stringent effect on apples success story.

Even the pockets of the Chinese market that are still enamoured with apple products can get their fix, through the thriving second hand market.

Apple’s high product prices drive consumers to buy used devices- None of that money goes to apple.

And because of the frequency of new Apple ‘upgrades’, there’s a surplus of devices. The second hand market, really, is never ending.

So yes, whilst Tim Cook can pass the blame to the Trade Wars, it’s clear that Apple’s business model has been dangerously in need of an update for quite some time.