Apple Inc. (AAPL) Faces Huge China Issue — iPhone 7 Could Fail

Apple Inc (NSDAQ:AAPL) iPhone SE

Apple Inc. has a growing China problem. The company has to fight pretty hard to keep its relevance in the country. The issue has little to do with the features that the U.S. tech firm puts in its gadgets, but the fact that so many others in region can match its standards. Further yet, with no need to account import taxes and other such financial factors, local rivals can offer premium handsets at much lower prices than Apple.

Apple struggles in China

Bloomberg reports that Apple in China has lost significant market portions to its rivals. Local consumer tech makers like Huawei and Oppo dig deeply into the comapny’s iPhone sales. This is aided by the fact that Apple’s hugely successful 6th generation handset makes it difficult to keep growing.

Apple Inc (NSDAQ:AAPL) iPhone SE

Tim Cook, CEO at Apple offered a projection back in April stating that his firm would see yet another quarter of sales declines. China alone accounts for nearly one-fourth of Apple’s total sales revenue. The brand’s deterioration in the Asian state stands to contribute significantly to its overall sales slump. This week, the company swill reveal just how far they have fallen. Apple will share its Q2 earnings on the 26th of July.

One Chinese local claims that forking out over $700 dollars for a new iPhone 6S simply isn’t a viable option. His sentiments are shared by many in China, who instead opt for brands like Huawei and Xiaomi. Both these brands are massive in the country and offer cheaper phones with iPhone-like features.

Abbey Lamba explains. “It’s a function of cheaper phones becoming good enough,” she said. The Mizuho Securities analyst says there isn’t much legroom where Apple is right now. This is despite the company pushing out high appealing gadgets “[T]here’s not much more growth at the upper end of the market.”

iPhone 7

Apple Inc. could see a satisfying spike in its handset sales later this year though. Consumer trends show that people tend to upgrade their handsets once every two years. Those who’ve held on to their iPhones 5S and 6 are expected to come around to for an upgrade in September. Beyond that, the company’s App Store is huge in China. Its appeal among Chines millennials should translate nicely into iPhone 7 sales, according to Bloomberg.

In China though, cost will be Apple’s biggest downfall. While the iPhone 6S goes for 5,000 yuan (~$750), Hauwei’s leading high-end product, the P9, goes for 3,688 yuan (~$520). The P9 houses features nearly identical to the 6S too. It comes with a fingerprint scanner, Standard 64GB storage space, and high quality front and rear-cameras.

Apple is known for its cult-like consumer base, which opts for anything the firm produces regardless of its features. In tough economic times though, brand loyalty stands little chance against cheaper products with identical features. Kantar analyst Lauren Gueveur reports that China is looking less at foreign brands and more a local items instead.

“There is also a sense of pride of being a Chinese phone user and owning a Chinese phone.”

Bearing this, Apple Inc.’s iPhone 7 as well as further generations face a hard time finding growth in the region.

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