Apple suppliers take a hit after iPhone sales slump warning

Apple CEO Tim Cook

Apple CEO Tim Cook

With Chinese consumers less willing to part with their money, Apple's high prices may be leading shoppers to buy similar products made by Chinese phone companies like Huawei and Oppo.

Cook blamed a number of issues, including lackluster iPhone sales, but also pointed to Trump's trade war with China.

Sales of Apple's cheaper iPhone XR have also been a thorn in Apple's side since it hit stores in late October.

Chief Executive Officer Tim Cook said sales will be about $84 billion in the quarter ended December 29, down from earlier estimates of $89 billion to $93 billion. To put it that number into perspective, Facebook is now worth $380 billion ($70 billion less than what Apple lost in the last quarter).

Apple (AAPL) unexpectedly slashed its revenue forecast for the fiscal first quarter of 2019 on Wednesday, citing weakness in China and lower-than-anticipated iPhone revenue.

Cook said the iPhone "accounts for all of our revenue shortfall", whereas other products in Apple's lineup such as the Mac and iPad are seeing strong growth.

Wednesday was the first time that Apple issued a warning on its revenue guidance ahead of releasing quarterly results since the iPhone was launched in 2007.

Apple's shares fell by 10%, taking its value - which previous year saw it become the first listed company to be worth more than $1tn - below $700bn.

The broader S&P 500 fell 24 points, or 1 per cent, to 2,485. Services generated $10.8 billion in revenue for the quarter - a 27 percent increase from a year earlier. But he admitted that the downward revision of its sales forecast is "disappointing". We knew this would create a hard compare for the first quarter of 2019, and this played out broadly in line with its expectations.

Analysts are adding Apple's predictions and their effects to fears of an economic slowdown. "I mean, look, they've gone up a lot". China's smartphone market has been down 6% year-over-year in the third quarter of 2018 and is expected to drop by 3% in the fourth quarter of 2018, according to IDC.

However, the company's woes in China have been exacerbated by a court decision that could potentially ban iPhone sales in the country. Furthermore, Cook conceded that the revenue from iPhone sales was lower than anticipated. That growth came entirely from higher prices.

This piles on to existing anxiety of a slowdown in global growth, Apple can be used as a proxy to China's growth. Cook warned that the company's latest revenue guidance would be lowered to $84 billion.

While President Trump's trade war with China isn't helping Apple and other United States technology companies, Ives believes Apple miscalculated by continuing to roll out high-priced phones in China, creating an opening for rivals with less costly alternatives that still worked well.

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