Is it the China slowdown or is it just Apple?

Tim Cook

In a letter Wednesday announcing a cut in its fiscal first quarter 2019 guidance, Cook said the revenue shortfall is due to lower than anticipated iPhone revenue, which primarily happened in Greater China.

Apple had previously estimated it would earn revenues of $89 to $93 billion in the most recent quarter.

Apple on Wednesday cut the revenue forecast for its latest quarter, citing fewer iPhone upgrades and weak sales in China, and its shares tumbled in after-hours trade.

In a letter to its investors, Apple CEO Tim Cook said that the manufacturer had failed to foresee economic deceleration in emerging markets, particularly in China.

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It also said that "more than 100 per cent" of its revenue decline from the previous year could be attributed to lower Chinese demand for iPhones, Macs and iPads. "We manage Apple for the long term, and Apple has always used periods of adversity to re-examine our approach, to take advantage of our culture of flexibility, adaptability, and creativity, and to emerge better as a result".

The news from Apple has already sent the value of the company plummeting by more than $55 billion, and as trading continues today, it is possible that it will drop further.

China's not the only reason Apple is reducing its iPhone sales guidance, however. 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.

Stocks went into a steep slide after Apple reported a slowdown in iPhone sales over the holidays in China, a hugely important market for the company.

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Apple has held firm on its premium pricing strategy in China despite the risk of a slower economy, a factor that has been exacerbated by the strong USA dollar. "Our other products category was even stronger than the overall company number". Trump said that Apple is now building a new campus in USA because of "what we did with taxes and the incentives we created in the United States". It's the first time since 2002 that Apple issued a reduction in its quarterly revenue forecast.

He points to tensions between China and the United States as contributing to the problem, but insists that Apple's future in the country is "bright".

"And, while we saw challenges in some emerging markets, others set records, including Mexico, Poland, Malaysia and Vietnam", he said.

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