Apple iPhone sales appear to be in big trouble, despite iPhone being on track to post a 40 percent year-over-year unit sales gain through the second quarter.
Having lost the top position in U.S. smartphones sales to Samsung in May, virtually all of Apple’s positive sales momentum has been coming from the China. But after losing $3 trillion in the markets, and with their wealth frozen, a hundred million Chinese no longer need an iPhone.
Apple is reported to be growing about five times faster than Samsung, despite excellent reviews of Samsung’s new Galaxy S6/Edge. Analysts’ positive opinion of Apple was reaffirmed when Samsung reported in May that it only achieved a 15 percent rise in profit to $6.1 billion on a 2 percent quarter-to-quarter revenue growth, to $43 billion.
A close look at Apple’s numbers show that first quarter revenue from “Greater China” grew by 71 percent year-over-year, to $16.8 billion. The iPhone sales growth in China accounted for over 56 percent of Apple’s total revenue growth for the quarter.
Analysts expect Apple to post another extraordinary sales report for the second quarter ending June, with over 50 million iPhone unit sales and revenue of $48 billion.
Kantar Worldpanel Com Tel’s Carolina Milanesi published a comment last week that after losing U.S. market leadership to Apple in the three-month period through April 2015, the latest data shows that Samsung was again number one in U.S. vendor rankings in the first full month of Galaxy S6 availability.
The iPhone 6 remained the best-selling smartphone in the U.S., and the iPhone 6 Plus was the fifth-most-popular for the period ending May 30. But Samsung’s Galaxy S5 held the second spot, and the Galaxy S6 held third place. As a result, for the three months ending May, Apple’s U.S. iPhone sales U.S. actually declined by 5 percent from the previous year.
Kantar also exposes Apple’s poor performance in India and the three big Latin America markets of Mexico, Brazil and Argentina. Apple’s best penetration of these rapidly growing markets is Mexico, with only a 6.4 percent market share.
Such a shocking turnabout would be a disaster.
For the three months ending in May, China unit sales were up by 46.26 percent.The Apple’s growing dominance in the “Red Dragon” has been due to a concerted effort by Apple’s management to make iOS and Mac OS X easier for Chinese language users. Many of the upgrades at this year’s Apple Worldwide Developers Conference 2015 were optimized specifically to target Chinese users, including new tools for developers to respond to the unique challenges associated with Chinese language.
Apple has also won praise for the effectiveness of its retail stores and “Genius Bar” help desks in China. Apple’s’ head of retail stores, Angela Ahrendts, recently announced that the company opened 5 additional stores in February and is scheduled to expand from 15 to 40 stores over the next two years. Located in premium retail space, Apple’s retail stores in China are meant to distinguish the brand as aspirational.
But all this good news for Apple was through the month of May, when the Chinese stock market was up over 150 percent for the year. Patriotically following China President Xi Jinping’s late 2013 call for “Silk Road” domestic reforms aimed at expanding consumption by taking public hundreds of state-owned-enterprises, the number of Chinese stock brokerage accounts for small individual investors exploded from 20 million to about 100 million. The ultimate sign of status became watching live stock prices on the iPhone 6.
But after the Chinese stock markets lost $3 trillion in just 16 days of trading, the communist government on Thursday stepped in and suspended over half of the 2800 stocks in China for up to 6 months. Large holders are not allowed to sell stock and company insiders have been told to buy immediately.
China’s stock market boom had been a wealth machine until it shockingly bankrupted tens of millions of Chinese in just a few weeks. With their capital frozen, demand for more iPhones to check suspended stocks seems ready to plummet.