Sentiments remain high for Apple amidst declining sales and ongoing US-China trade war, says GlobalData
Despite declining iPhone sales for the second consecutive quarter and the ongoing US-China trade war, the overall sentiments for Apple remain high, according to GlobalData’s Company Filing Analytics platform.
Apple’s revenue declined by 7.2% in the third quarter (Q3) ended June 2019, marking its second consecutive quarter of decline with its flagship product iPhone (which accounts for approximately 50% of the company’s revenue) showing no signs of recovery in sales since the last three quarters.
Apple’s services business generated an all-time-high revenue of $11.5 billion in Q3 2019. The company’s objective is to increase the size of its services business two-fold from 2016 to 2020.
The combined sales of the company’s wearables and services businesses as a proportion of total revenue also increased from 21.6% in Q1 2019 to 31.6% in Q3 2019, with services business alone accounting for 21.3% share in Q3 2019. This is also helping the company in reducing its reliance on iPhone sales.
The US-China trade war has been taking a toll on many companies on both sides. However, Apple has so far been able to mostly stay immune to tariffs. On 13 August 2019, the US Trade Representative, which initially proposed an additional 10% tariff on several products, removed cellphones from the tariff list.
Apple manufactures/assembles key products, including its flagship product iPhone, in China, prices of which will increase further if the US imposes a tariff on Chinese imports. The American tech giant will either be forced to absorb the enhanced costs or pass it on to the customers thereby making its already-costly flagship product even more expensive. Furthermore, the trade war may also disrupt its supply chain.
The backlash from China in response to US tariffs can also affect Apple’s topline as it generates a significant proportion of its sales from the country. China was the third-largest revenue-generating nation for Apple, after the Americas and Europe in Q3 2019.
Increased tariffs can also shift Chinese buyers’ preference to buy products manufactured by Chinese companies. Apple has already been losing its market share to local smartphone manufacturers in China and globally as well. For instance, a Chinese firm, Huawei, became the second leading player in the quarter ending June 2018, surpassing Apple for the first time in global smartphone sales.