Apple Inc., long untouched leader of the technology world, is now under attack on multiple fronts. Global demand for the iPhone has dropped, allowing Chinese companies to make advances. The Department of Justice is suing Apple over its lucrative App Store, and European regulators are criticising the corporation. Apple also recently cancelled a car project that was once one of its well-known “next great things.” Along the way, the company’s valuation has fallen. After hitting a historic $3 trillion in 2023, Apple’s market capitalisation declined by hundreds of billions of dollars in early 2024, allowing Microsoft Corp. – Apple’s sometime foe, sometimes friend — to dethrone it as the world’s most valuable technology corporation.
The dawn and dusk of the Apple.
Apple launched the first iPhone in 2007, a game-changing product that combines a mobile phone, an iPod, and an internet browser. It was a game changer, including a touchscreen interface, a sleek design, and a distinct user experience. The iPhone was an instant success, with lines forming outside retailers to get their hands on one. Several aspects contributed to Apple’s smartphone market dominance, including innovation, marketing, leadership, and ecosystem.
On August 2, 2018, nearly a decade later, Apple made history by becoming the 1st publicly traded business in the United States to be valued at $1 trillion in market capitalisation. In August 2020, the firm established another record by being the first US corporation to surpass a $2 trillion market capitalisation.
Everything was going right; people anxiously waited to get their hands on new Apple products, even if their budget didn’t allow them to do so, and having an Apple product was supposed to be a statement of class and whatnot. But, suddenly, the iPhone market lost its dominance to Samsung smartphones. The year 2024 doesn’t seem lucky for the Apple firm, as the company sales fall by a bigger-than-projected 10 per cent in the March quarter.
So, the point of discussion is: What has impacted Apple iPhone shipments?
Even the biggest company in the US is not spared by the deadly impact of COVID.
The pandemic disrupted Apple supply chains in 2022, according to a new analysis of worldwide smartphone sales in the first quarter of 2024. According to preliminary data given by the International Data Corporation (IDC), Apple shipped 50.1 million iPhones in the first quarter, down from 55.4 million phones shipped in the same period last year, representing a 9.6% decline from 2023. Apple held 17.3% of the market, a decrease from 20.7% last year.
The COVID-19 has had a dramatic impact on Apple’s supply chain. The global crisis caused disruptions in supply systems globally, including Apple’s. Lockdowns, factory closures, and border restrictions have paralysed supply networks, disrupting the flow of raw materials, components, and completed goods.
Furthermore, Apple’s over-reliance on China as a manufacturing base has caused issues for its supply chain, with subsequent lockdowns and limitations in China affecting supply chain management efficiency. The pandemic has also resulted in a significant amount of stock accumulating by businesses, exacerbating demand variations and producing bottlenecks and shortages along supply chains. Overall, the COVID-19 pandemic has highlighted vulnerabilities in Apple’s supply chain.
In particular, Taiwan’s Hon Hai Precision Industry, whose plants are primarily situated in mainland China, has been responsible for the majority of the production of Apple’s flagship iPhone. However, the components that go into making items are acquired from many nations and areas; Hon Hai has just been assembling the finished goods. Specifically, the vast majority originate from China, Taiwan, Japan, and the US. The iPhone is reportedly manufactured in more than 40 nations, including smaller ones. The product’s fundamental semiconductors are largely produced in the US, but the engineers who work on its development are dispersed throughout Israel and other countries; not all of them are US citizens.
Apple considered supply chain globalisation to be more of a risk hedge since it was well aware of the hazards associated with its supply chain. Although it has attempted to shift certain product production to designated areas like Vietnam and India, it is reportedly hard to significantly alter China’s centralised production structure, with Hon Hai serving as its hub. Thus, the COVID-19 pandemic negatively impacted Apple’s sales and supply chain.
Against this backdrop, Apple’s next quarterly report, which is scheduled on May 2, is expected to be a bitter pill for investors. The firm has already warned that the figures will not compare favourably to the previous year.
The onset of competition from China and Apple’s share in the Chinese market.
Apple has been dealing with a slowdown in China for months, and the situation does not appear to improve. Counterpoint Research reports that iPhone sales in the country plummeted by a shocking 24% during the first six weeks of 2024. The most recent IDC smartphone figures indicate that the decline has continued. This could raise concerns about the deteriorating demand for the iconic but ageing product.
The challenging demand in China from domestic competitors.
Apple is also losing ground to local competitors. According to Counterpoint data, Vivo, headquartered in the Chinese industrial city of Dongguan, has emerged as the country’s largest provider. The results of the Counterpoint Research increase pressure on the iPhone, which has struggled to match its previous popularity in the world’s largest smartphone market. According to Counterpoint, China’s mobile market decreased by 7% in the first few weeks of the year, with Dongguan-based Vivo taking the lead, focusing on the budget sector.
Apple’s iPhone was steeply discounted in China due to weak demand.
To promote demand, Apple offered uncommon discounts on its website in January, and online resellers are now lowering prices by up to $180. In February, Apple Inc.’s dealers in China were cutting the price of iPhone 15 models by up to $180, indicating an abnormally sustained drop in demand. In February, the iPhone 15 Pro Max devices were selling for 1,300 yuan ($180), less than their original pricing on Alibaba Group Holding Ltd.’s Tmall. It’s a steeper drop than the approximately $120 discount the business offered on its smartphone array around the same time last year, and similar discounts are available on JD.com Inc.’s online marketplace.
The loss of the flagship series in the Chinese market.
In China, the latest iPhone generation has not been as popular as Apple’s flagship series in the past. Since the release of its most recent model in September, the Cupertino, California-based iPhone manufacturer has had difficulty maintaining sales in China.
The restrictions from Chinese authorities.
Beijing’s ban on foreign gadgets in the workplace, together with the rise of competitors such as Xiaomi Corp. and Huawei Technologies Co., have all affected sales. Perhaps more concerning is that prohibitions on the use of foreign technology in Chinese government offices have been increasing. As geopolitical tensions with the United States escalate, Apple’s reliance on the country — as both a market and a production hub — appears more dangerous.
More Chinese agencies and government-backed enterprises across the country have told employees not to bring iPhones or other foreign devices to work, triggering an unprecedented ban that will likely prevent Apple Inc. from entering parts of the world’s largest mobile market.
Multiple state enterprises and government offices in at least eight provinces, including the prosperous coast, have urged employees in 2023 to begin carrying local products. However, that’s a significant improvement from about September, when a few agencies in Beijing and Tianjin began instructing employees to leave foreign gadgets at home.
Apple is catching up with China’s ‘deflation’ trend, with the goal of increasing demand for iPhones, according to IDC analyst Will Wong. “According to IDC’s preliminary January statistics, the impact was primarily coming from other Android vendors, as they saw Apple decrease by roughly 10% year on year in the month, while Huawei surged by triple digits.”
Apple’s sales in China decreased 13% to $20.8 billion in the December quarter. This fell far short of analysts’ expectations of $23.5 billion and was Apple’s lowest showing in the Asian country in years. According to Ivan Lam of Counterpoint Research, iPhone sales in the Chinese market are increasingly dependent on promotional activities. Apple, for example, offered a short-term discount to third-party channels in advance of International Women’s Day.
During the pandemic, Apple’s iPhone showed the best resiliency as buyers stayed away from purchasing smartphones from most of its Android-powered competitors. That inventory buildup prompted aggressive pricing from Chinese competitors such as Xiaomi, which took months to deplete stocks and is now ramping up shipments again. Huawei’s unexpected comeback to prominence last year, with its own made-in-China silicon and HarmonyOS operating system in the Mate 60 series, has eroded Apple’s share of China’s premium market since August last year.
According to IDC, Xiaomi’s first-quarter handset shipments of 40.8 million devices increased 33.8% year on year, while Apple and Samsung collapsed. According to analysts Steven Tseng and Sean Chen, the company’s strong handset sales were most likely driven by a comeback in its international market, which might lead to high-teens sales growth in Q1. “Increased competition in China is a key component of Apple’s decrease in the first quarter,” said Nabila Popal, research director at IDC.
The Tech Titan is under multiple government radar in accusations of creating a monopoly.
US antitrust suit.
In March, the DOJ and 16 state attorneys general filed a lawsuit saying that Apple imposed software and hardware limits that made it difficult for competitors to compete and consumers to transfer phones. The case cites five technologies in which it claims Apple inhibits competition: super apps, cloud streaming game applications, messaging apps, smartwatches, and digital wallets. The DOJ claims that Apple controls 70% of the “performance” smartphone market, which it defines as “a more expensive component of the broader smartphone industry.” According to the complaint, Apple controls 65% of the overall smartphone market in the United States.
The DOJ lawsuit accused Apple of charging a 30% commission to limit developers’ programmes beyond the company’s dominant App Store. According to the lawsuit, Apple recognises that while a community of developers and accessory makers is critical to the success of the iPhone, they also pose an existential threat to its extraordinary profits by empowering consumers to ‘think different’ and choose perfectly functional, less-expensive alternative smartphones.
The DOJ claimed that Apple’s refusal to make iMessage available on other cellphones is an illustration of its monopoly. The DOJ claims that Apple restricts rival messaging programmes on its operating system by preventing access to SMS (a more universal text messaging technology). “Apple limits the reach of third-party messaging apps and strengthens network effects that benefit Apple,” the lawsuit claims.
The end consequence is a dynamic in which blue bubbles contain cultural capital. In group text-message discussions with both iPhone and Android users, for example, texts from Android users appear in green bubbles rather than iPhone blue bubbles, which carries a stigma, particularly among young users.
It is worth mentioning that Apple has previously addressed some of these concerns. The company recently introduced support for cloud-based gaming services and announced that it will use the RCS cross-platform messaging standard later this year. It claims that the lawsuit is “wrong on the facts and the law” and promises to “vigorously defend against it.” However, the legal struggle is expected to last years.
European Union Pressure.
The region’s Digital Markets Act went into effect in early March, creating a new threat to the company’s “walled garden” — the environment that pushes consumers to purchase other Apple products and services. As part of the improvements, customers will be allowed to download software from sources other than the App Store for the first time, known as side loading. Users can also access other payment systems and more easily select a new default web browser, addressing two common developer and regulatory concerns.
Apple has consistently opposed such modifications, claiming that they will compromise the user experience and security of its software. “Apple is having to design technology to allow one app to install other apps, and that carries risk,” Phil Schiller, a longtime Apple executive who now manages the App Store, said in an interview in January. The firm has agreed to take a lower commission on app store purchases, but it has also implemented certain additional levies that have outraged developers. The greater risk for Apple is the fragmentation of a business model worth tens of billions of dollars per year.
Separately, on March 4, the EU imposed a €1.8 billion ($2 billion) penalty on Apple following an investigation into charges that it impeded music-streaming rivals, notably Spotify Technology SA. The European Commission also ordered the Cupertino, California-based company to stop blocking music-streaming apps from telling consumers about lower prices outside of Apple’s App Store.
The bottom line.
All these have contributed collectively and harshly to the decline in sales of iPhones, and hence, the shipments were impacted.
