The ongoing US-China trade war has added to the woes faced by Apple beyond competing against Samsung and insurgent Chinese makers in an increasingly competitive market.
The Apple iPhone had remained clear from initial tariffs set by the US (10% on $200 billion worth of Chinese products). However, relations with China worsened following a threat from US President Trump to impose a 25% tariff on an additional $325 billion worth of Chinese imports, which could impact Apple.
Apple sales 2019
Apple assembles most of its products in China; additional tariffs are likely to hurt profits. JPMorgan estimated that Apple would have to increase the cost of the iPhone by 14% if it wants to mitigate losses caused by the potential tariff increase. As a result of the trade dispute, the share value of Apple has dropped over 10% so far in May.
If tariffs are set in place, China could call for a boycott of Apple products and focus on Chinese smartphone companies such as Xiaomi and Huawei. Revenue generated by Apple in China has already suffered, dropping 21.5% in Q2 2019 compared to the previous year.
On 13 May 2019, Apple was defeated in an antitrust case suit in the US Supreme Courts. A group of consumers claimed Apple had unfairly driven up app prices through the locked-down App Store. The ruling allows lawsuits regarding its app store business which could cause further trouble
Poor sales cause the decline of the Californian tech giant
Apple has had a shaky start to 2019. The tech giant reported quarterly revenue of $58 billion for the second-quarter in 2019, down 5% from the revenue generated in the second-quarter in 2018.
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The revenue drop from poor product sales was contrasted by revenue growth in services, which reached an all-time high of $11.45 billion. Although iPad, wearable technology, home accessories and Apple services units all witnessed sale gains, iPhone sales slumped by 17% and Mac sales also declined significantly.
Weak product sales were expected; CEO Tim Cook issued Apple’s first profit warning at the beginning of the year. Increased competition from other smartphone manufacturers exerted pressure on Apple sales.
Apple is unlikely to recover anytime soon
Ultimately, slowing iPhone sales, disinterest from China, falling share prices and antitrust scandals have plagued Apple in 2019. A strong performance is needed from the company to recover from the problems faced so far this year.
Services developed by Apple have experienced strong growth and could help the company recover. A subscription-based game offering called Apple Arcade, and a new credit card and digital banking service in partnership with Goldman Sachs will help develop the service business segment. However, these are not expected to arrive until at least the summer, leaving little time to make an impact on company financials.