Weakening economy in China responsible for Apple forecast cuts

中國經濟疲軟導致蘋果預測減產

CEO Tim Cook warned investors to expect a lower global revenue than initially predicted


TAIPEI (Taiwan News) — Apple has once again cut revenue forecasts for the first fiscal quarter of 2019, which the company reports is due to a drop in demand from China, one of its most vital markets.

CNN published a letter from Apple chief executive Tim Cook on Wednesday (Jan. 2) that warns investors to expect lower margins in the first quarter due to a plunge in sales over the Christmas period. One of the major reasons for the disappointing projections, the letter explains, is significant economic deceleration in China.

The company initially projected a global revenue of between US$89 billion and US$93 billion after promising fourth quarter sales, but now looks to only yield approximately US$84 billion. Apple share prices sank by over 7 percent in after-hours trade.

Cook tells investors that the majority of revenue shortfall is due to slowing sales in “Greater China,” which the company defines as China, Hong Kong, Macau and Taiwan, but goes on to mentioned China’s trundling economy as one of the biggest contributing factors to forecast cuts.

The chief executive believes China’s economic issues have been exacerbated by market uncertainty created by continued trade friction with the U.S., although the stagnation is evidenced in the drop in customer traffic Apple has received in its Chinese retail stores and partner chains.

The Chinese government reported in October 2018 that the country’s economy had grown by just 6.5 percent over the financial quarter ending in September—the slowest rate since the beginning of 2009, in the wake of the global financial crisis. Even with this said, actual figures are likely to be lower, as the state is well-known for obscuring particular official figures and flat-out fabricating others.

The ongoing trade war has caused dents in economies all over the globe, but reports suggest China has been hit much harder than any other country.

China’s economy is heavily reliant on industry and manufacturing, but multinational corporations have already begun to move production lines elsewhere, and the country’s official manufacturing Purchasing Manager’s Index has slipped into contraction.

China forms Apple’s largest customer base in the world, with statistics showing there were over 130 million iPhone users in 2015—30 million more than in the U.S.