On the eve of the release of its most recent iPhone, Apple did not require a crisis in China, according to Mark Gurman in Bloomberg. Beijing last week started ordering government employees to stop using Apple goods entirely, whether at work or at home, citing cybersecurity worries as just as company leaders were getting ready to announce the iPhone 15. The Chinese government is thinking about extending the ban to include state-owned businesses.
As investors assessed the potential impact on Apple’s sales, “the news erased $190 billion from Apple’s valuation.” “China, which is also the center of Apple’s supply chain, accounts for about a fifth of the company’s sales.” However, with rising geopolitical tensions, “anti-Apple sentiment has spread on Chinese social media” in recent weeks. “The iPhone 15 line, with niceties like a titanium frame and enhanced camera, is meant to help pull the company out” of a recent rut. However, Apple will need China to make it happen.
According to Dan Gallagher in The Wall Street Journal, this is a multi-billion dollar headache. According to China’s National Bureau of Statistics, if the iPhone ban is extended to include “state-owned enterprises,” there would be around 56 million employees affected. Losing “56 million would be a notable chunk to take out of the pool of potential buyers” despite there being 230 million iPhone sales worldwide each year.
According to Timothy Green in The Motley Fool, the main issue isn’t how this government decision would directly affect Apple’s sales. The greater concern is that the prohibition may “reverberate” and encourage other Chinese consumers to stop buying Apple products, “either as a result of pressure or simply reading the tea leaves.”
Sales may be declining in China, but Tripp Mickle of The New York Times reported that they are increasing practically everywhere else. After releasing the original iPhone fifteen years ago, Apple currently accounts for “about a fifth of the world’s smartphone sales, up from a low of 13% in 2019.” Not only in China, but also in Europe, Japan, and India, sales have soared.
In the United States, iPhone sales “now account for more than 50% of smartphones sold, up from 41% in 2018.” This is partially due to Apple’s claim to the coveted “coolness” factor among young customers. According to investment bank Piper Sandler, “nearly 90% of American teenagers own an iPhone.” And customer loyalty is unmatched: 94% of iPhone users say they’ll certainly buy another one.
According to Dave Lee, Apple is a victim of its own success as well. Users may keep their iPhones longer than in the past before needing to upgrade thanks to “the quality of Apple’s engineering.” With “more than 1 billion subscribers to its various offerings,” including Apple TV+ and Apple Music, Apple has realized this and switched its focus to services, which has increased services income. Apple is still mostly an iPhone company.
A quicker chip, better camera, and a smaller bezel are all features of the new iPhone 15 series. Will that be sufficient to convince consumers to update in large numbers? It’s a lot to ask.