Over the years, Apple has skyrocketed behind the massive increase in manufacturing and sales in China. But recently, the reliance of tech giants on the world’s most populous countries has changed from strengths to weaknesses.
China’s efforts this spring to fight the Covid-19 disrupted iPad production, damaging retail sales nationwide, squeezing Apple’s earnings and contributing to a decline in earnings for the first time in almost two years.
On Tuesday, Apple reported that sales for the three months ended in June increased by 2% to $ 82.96 billion. That’s at least $ 4 billion less than the company expected to avoid closing Covid-related factories in Shanghai. According to the company, profits fell 10.6% to $ 19.4 billion, the largest quarterly decline since 2019.
In recent years, Apple has been able to minimize its impact from China through a strategic shift from selling more devices to selling more software and services. Total sales of products such as the iPhone, iPad and Mac declined in the last quarter, but the company generated $ 19.6 billion. Quarter from app sales, Apple Music and Apple TV + subscriptions. A 12% increase in service sales was the business’s lowest quarterly profit in two and a half years.
The result exceeded what Wall Street analysts expected to see a decline in iPhone sales. Apple said it was optimistic about the quarter and expects sales growth to accelerate and supply chain challenges to be eased.
“Tim Cook and the crew skillfully threaded the needle,” said Mike Frey, president of Bedel Frager, based in the Bay Area and managing $ 600 million. .. But Frazier said it’s clear that even wealthy Apple customers can cut spending a bit, which is likely to put pressure on profitability in the future.
Apple CEO Tim Cook has made a big bet on China and integrated most of its manufacturing in the country, known for its low-cost workforce and business-friendly policies. After the outbreak of the coronavirus began in 2019, Apple stopped producing the iPhone and lost sales. Since then, China has controlled the virus and many Western nations have suffered outbreaks, benefiting from stable production.
But China’s “zero-covid” policy, which closed Shanghai in the spring to calm the outbreak, re-exposed the risk of Apple’s country dependence on device manufacturing and exports.Production turmoil in the last quarter Apple couldn’t fully benefit from the release of the MacBook with a more powerful processor, some of which were backordered until August.
“Investors are concerned about our ties to China,” said Dave Harden, chief investment officer at Summit Global, which has invested approximately $ 2 billion near Salt Lake City. It also counts Apple in its possession. “They want to know. Is Apple going to develop the iPhone outside that part of the world?”
Apple shares rose 3% in after-hours trading on Thursday.
Apple’s various results this quarter symbolized a wide range of trends affecting the global economy. China’s revenues fell 1% in China, the slowest-growing since early 2020, but sales increased in the Americas, where retail spending has shown resilience in the face of rising inflation.
The economic slowdown will test Apple’s decade of growth. It overcame the Great Recession behind the introduction of the iPhone, the best-selling product in history. However, in recent years there has been a shift from product innovation to gradual improvement, and analysts and investors question whether customers will postpone the purchase of new devices in a slimmer financial era. I am.
Apple relies on the iPhone for about half of its total sales. In recent years, we have expanded our customer base by offering seven models with prices ranging from $ 429 to over $ 1,500. Premium pricing means that Apple customers tend to be wealthier than the average smartphone buyer, but according to technology research firm Consumer Intelligence Research Partners, about one-third of customers are annual. I earn less than $ 50,000.
Other tech companies, including Google’s parent Alphabet and Facebook’s parent Meta, are responding to the recession by announcing delays in employment. Their change occurs when the business slows down after a rapid expansion during a pandemic.
