Apple Faces Multiple Problems in China

Since Apple (NASDAQ: AAPL) released the iPhone 4 on October 4 of year 2011, sales from China grew year by year and finally became one the most important revenue parts. The company made 231.28 billion for revenue and 53.39 billion for profit in year 2015. Even though the U.S. is still Apple’s largest revenue market with a value of 93.9 billion, but China has followed closely behind with 58.7 billion in revenue which is up 83% than last year. The market from China already went beyond Europe and reaches to the second largest market for Apple. While Apple is taking the sweet spot from China, recent problems just alert the company the China’s market is not a simple apple but also with poisons.

Regulation

In April, China shut down Apple Inc.’s online book and movie services in the country, suggesting an intensifying campaign to bring Web content in line with Beijing’s stringent guidelines for traditional media.  Today, a dispute between Apple Inc. and Chinese regulators broke into the open after Beijing’s intellectual property authority said the design of the iPhone 6 and iPhone 6 Plus violated a patent held by a Chinese company. The ruling illustrates the growing challenges Apple and other technology companies now face in a key overseas market as China increasingly flexes its regulatory muscle.

For years, Apple is named as one of the most successful western technology giants in China. Greater China is its second-largest market, accounting for a quarter of its global sales in 2015. Comply with the law and negotiate with regulators are always included in Apple’s strategies for China and that’s how Apple succeed. However, due to the risk concerns and the purpose to strengthen public monitoring keep the government request more assistants from the largest foreign phone seller in the country. In contrast with Apple’s public battle with the U.S. Federal Bureau of Investigation over the agency’s request for help in unlocking an iPhone, the company’s disputes with the Chinese government have largely been behind closed doors. Officially, Apple denied the help to assist government for users’ information.

Currencies

The slowdown of China’s economic growth is one of the biggest concerns for both emerging market and global economy. In order to solve this problem inside the country, the central bank of China is trying to use its monetary policies to lift more growth power for China. Also the government published several plans to expand the global cooperation on its broader. But the key here is the country has to raise its export to secure the related jobs. Lowering the interest rate will be the most useful ways and also a low interest rate could encourage the domestic investment. Besides, Fed ended the zero interest period last December and is looking for 2 interest hikes this year. Since last August, the China’s government banned the on shore fix exchange rate between dollar and RMB, RMB just depreciated a lot against dollar. 

Based on this point, the RMB revenue that will come from its new product IPhone 7 in China’s market this year could be significant declined when valued with dollar. This loss from second largest Apple’s market could put the biggest potential risk for Apple’s performance of year 2016.

Apple is still the most successful company right now. However, we just saw many risks behind this 526 billion company. Carl Icahn sold out its position in Apple 2 month ago by siting the growth from China will be damaged based on the economic concern. And now regulators are still pushing pressure on Apple to work with the government by providing more users’ information. Along with the currency issue, all the hurdles from China now in front of Apple just like several years ago the plentiful opportunities offered by same country.

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