Why Apple Inc. (NASDAQ:AAPL)’s Future Is Complicated


Apple Inc. (NASDAQ:AAPL) is struggling to show investors that things are alright after the company reported its first sales decline in more than a decade. CEO, Tim Cook, has made quite a number of media and public appearances to try and assure the investor community that Apple only slipped but didn’t fall in 1Q2016, but few seem to be buying the story. But what is complicating the picture for Apple?

The tiger is unwell

The economic slowdown, protectionist policy and tough competition from homegrown rivals in China are making it difficult for Apple Inc. (NASDAQ:AAPL) to increase sales in the country. That is happening at a time when China has become a key market for iPhones, Apple’s bread and butter.

In 1Q2016, total smartphone shipment in China fell 30.6%, a direct consequence of economic slowdown in the world’s fastest growing economy. As for Apple, its share of the Chinese smartphone market shrank in 1Q2016 to just 11%, putting it at No. 4. Apple also shipped 14.8% fewer iPhones in China in 1Q compared to a corresponding quarter a year earlier. Apple said iPhone sales fell 16% globally.

Can India be the new China for Apple?

India’s massive population of 1.2 billion people makes it a huge potential market for a company such as Apple Inc. (NASDAQ:AAPL). The fact that only about 21% of Indians own smartphones adds to the exciting story. But Apple’s market share in India is a paltry 2% and it could shrink considering that regulators there are objecting to Apple’s way of doing business in the country. Apple mostly sells recycled iPhones in India, which it believes are affordable to the country’s low-income population. But India’s telecom ministry recently said that India wasn’t a dumping pit for recycled hazardous materials. Apple must now change strategy in India, but will the populations afford its typically pricey iPhones?

No product to take the iPhone hat

Apple Inc. (NASDAQ:AAPL) has milked iPhone business for years and as the smartphone market ages, the company doesn’t look prepared for the change. Outside the iPhone, you will struggle to see any other product that could generate the kind of revenues and profits that Apple is used to from the iPhone market. The Apple Watch only generated about $6 million in revenue in the first year.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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