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Apple blames China for major iPhone sales slump

Apple chief Tim Cook has released a letter to investors blaming economic weakness, amongst other things, for lower revenues than previously estimated.

The iPhone maker anticipated revenue of about $84bn (£67bn) for the three months to 29th December. This follows the November forecast of sales of at least $89bn – a prediction that had already disappointed investors.

While it will be a number of weeks until Apple completes its final report, the updated revenue forecast marks an almost 5% fall from the same period last year. What’s worse is that it represents the firm’s first year-on-year quarterly decline since 2016.

“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Cook told investors in the letter.

“In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.”

Cook explained that China’s economy began to slow in the second half of 2018, with the government-reported GDP growth during the September quarter being the second lowest in the last 25 years.

“We believe the economic environment in China has been further impacted by rising trade tensions with the United States. As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed. And market data has shown that the contraction in Greater China’s smartphone market has been particularly sharp,” he said.

Despite these challenges, Cook said that the company still believes that its business in China has a bright future. “The iOS developer community in China is among the most innovative, creative and vibrant in the world. Our products enjoy a strong following among customers, with a very high level of engagement and satisfaction. Our results in China include a new record for Services revenue, and our installed base of devices grew over the last year. We are proud to participate in the Chinese marketplace,” he said.

iPhone sales slump

With regards to the iPhone in particular, Cook told investors that lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of of Apple’s revenue shortfall and for much more than its entire year-over-year revenue decline. “In fact, categories outside of iPhone (Services, Mac, iPad, Wearables/Home/Accessories) combined to grow almost 19 percent year-over-year,” he revealed.

“While Greater China and other emerging markets accounted for the vast majority of the year-over-year iPhone revenue decline, in some developed markets, iPhone upgrades also were not as strong as we thought they would be.

“While macroeconomic challenges in some markets were a key contributor to this trend, we believe there are other factors broadly impacting our iPhone performance, including consumers adapting to a world with fewer carrier subsidies, US dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements.” 

iPhone Xs Max

Apple introduced its biggest iPhone to date in the form of the 6.5-inch-screened iPhone Xs Max back in September.

The Xs Max features Super Retina display, a faster and improved dual camera system, the first 7-nanometer chip in a smartphone – the A12 Bionic chip – faster Face ID, wider stereo sound, a new gold finish and Dual SIM functionality.

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