Apple Blames Weak iPhone Sales on China, Fewer People Upgrading

The iPhone was once Apple’s biggest boon. Now it’s becoming the company’s biggest headache

"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China", Tim Cook, the chief executive at Apple, said in a letter to investors.

China's "economy began to slow there for the second half", Mr Cook said during an interview with CNBC on Wednesday afternoon.

Back in late 2017, Apple confirmed that it was throttling iPhone performance.

The news, which comes as a spotlight grows on Beijing's attempts to revive stalling growth, sent Apple shares tumbling in after-hours trade, hammered Asian suppliers and triggered a broader selloff in global markets. A couple of years ago it started making older iPhone 6S and iPhone SE models in India with a manufacturing partner called Winstron.

Apple now expects revenue of 84 billion dollars for the quarter spanning from October through December. "In addition, these and other factors resulted in fewer iPhone upgrades than we had anticipated". Last year, Apple had reported sales of $88.3 billion in the fiscal first quarter, so this slowdown means Apple is reporting a holiday quarter slowdown for the first time since Cook became the CEO in 2011.

Apple's stock plunged 7 percent to $146.40 in Wednesday's extended trading.

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AMS, a European chipmaker that supplies Apple, saw its shares drop almost 20% after Apple warned of slowing iPhone sales.

SAN FRANCISCO-Apple acknowledged that demand for iPhones is waning, confirming investor fears that the company's most profitable product has lost some of its luster.

On Apple's earnings call in November, Cook cited slowing growth in emerging markets such as Brazil, India and Russian Federation for the lower-than-anticipated sales estimates for the company's fiscal first quarter.

Tim Cook also blamed the ongoing trade war between the USA and China for the slowdown.

"We believe the economic environment in China has been further impacted by rising trade tensions with the United States".

In his letter, Cook said Apple has $130 billion in net cash and that it intends to continue its efforts to reduce that cash balance to net zero, which the company has so far accomplished through dividend increases and share buybacks. "While macroeconomic challenges in some markets were a key contributor to this trend, we believe there are other factors broadly impacting our iPhone performance, including consumers adapting to a world with fewer carrier subsidies, U.S. dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements", Cook wrote in the letter.

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