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China Takes Wind Out Of Apple iPhone Sales

12 January 2019

The reckoning came in the form of a warning that Apple CEO Tim Cook delivered to the company's shareholders in a letter released after the stock market closed on Wednesday.

Apple now expects revenue of 84 billion dollars for the quarter spanning from October through December.

Wednesday's sales forecast was the first time that Apple had revised its guidance to investors for more than 15 years. While the reduction in gross margin is small, it suggests that buyers are shifting to lower-priced products.

In a letter to investors, Cook blamed a "challenging quarter" on softening emerging markets, mainly China, and poor iPhone sales.

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Apple has claimed that the lowered revenue outlook is due to several reasons, including a weakening economy in China, launch timing of the iPhone XS and iPhone XS Max compared to the iPhone X, supply constraints due to the number of new products, economic weakness in developing countries and the strength of the U.S. dollar.

"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China", Apple CEO Tim Cook said in a letter to investors.

He also pointed to a lower than expected number of iPhone upgrades in some developed markets and said the tech firm had launched an initiative to make it easier to trade in handsets in stores, finance the purchase over time, and get help transferring data.

Tim Cook also blamed the ongoing trade war between the United States and China for the slowdown.

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Apple has become the target of nationalist sentiment over the arrest of Huawei's chief financial officer in Canada at the behest of the USA for alleged Iran sanctions violations. And it seems that things are not going as well for Apple as the company had hoped for.

Rob Enderle, an independent analyst said, "When the United States went after the Huawei founder's daughter, the Chinese government made Apple the target of the day, so sales should be way off".

Apple is now the highest-profile multinational corporation to warn that the economic slowdown in China could hurt its business. Due to strength of the dollar against the Indian rupee, India is one of the most expensive places in the world.

A woman looks at the screen of her mobile phone in front of an Apple logo outside its store in Shanghai, China July 30, 2017.

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The warning, which came after trading in NY closed on Wednesday, looked likely to rattle already-volatile stock markets when they reopen on Thursday - with stock index futures pointing to Wall Street falls. Of course, Apple realises this. The company even allowed iPhone users to turn the throttling off if they so desired. "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, USA dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements", Cook wrote in the letter.

China Takes Wind Out Of Apple iPhone Sales