Saturated market, lack of innovation discourage demand: experts
Slower growth for Apple Inc in China might have contributed to a major decline in the U.S. tech giant's sales in the fiscal quarter that recently ended, analysts in China said on Wednesday, pointing to "relatively high" saturation in the Chinese market and Apple's failure to introduce "significantly new" features in its iPhones.
On Tuesday, Apple posted a third consecutive quarter of declining iPhone sales and the first drop in its revenue, which dragged its shares down on the day.
In the fourth fiscal quarter ended on September 24, Apple said it sold 45.51 million iPhones, a 5 percent drop compared to the same quarter in 2015. Revenue fell 9 percent to .8 billion in the quarter, from .5 billion in this year's third fiscal quarter, Apple's filings showed. Revenue from iPhone sales dropped 13 percent year-on-year to .2 billion.
Following the news, Apple's share price was down 3.87 percent in pre-market trading.
In China, revenue from sales contracted by nearly 30 percent, compared to the same quarter last year.
Despite the declining sales, Apple remains optimistic about its future in the Chinese market, saying "improved sales from China were around the corner," according to a Reuters' report on Wednesday.
However, recovering from its sales loss this quarter in China is "almost impossible" in the near term, according to Wang Yanhui, secretary-general of the Mobile China Alliance.
"The factors that contributed to the sales decline in China this quarter will not improve in short term," Wang told the Global Times on Wednesday. He said demand for new iPhones in the Chinese market is "stable with no growth," because of the lack of "significantly new" designs and functions in the new models.
Another factor that contributed to the fall in demand for iPhones is the saturated market in China, according to Zhu Dalin, an analyst with IT research firm Analysys International.
"Chinese consumers who can afford an iPhone already own one. Because the new iPhones are so similar to the old ones, consumers are not so anxious to change to the new ones," Zhu told the Global Times on Wednesday. But he added that this is a problem faced not only by Apple but by other smartphone manufacturers as well.
Despite facing a decline in sales in the country, Apple's dominant position in the Chinese market for high-end smartphones has not changed, Wang said. "At least for now, no other cell phone manufacturer can challenge that position," he said.
South Korea's Samsung Electronics Co has suffered from a scandal involving its new Note 7 smartphones, of which production has been halted due to its problematic battery that can catch on fire, Wang said. And China's Huawei Technologies Co is not even competing on the same level as Apple, according to Wang.
The average price for Huawei smartphones is between 2,000 yuan (5) and 3,000 yuan, while the average price for the iPhone is roughly 4,000 to 5,000 yuan, he pointed out.
However, experts caution that if Apple continues to fail to bring new devices or services to the market, other brands will catch up and cut into its market share.
"I think Apple realizes the importance of the Chinese market and is working toward further expansion in China, with new research and development (R&D) efforts targeting the market," Wang said.
Apple confirmed to media outlets earlier this month that it would open a second R&D center in Shenzhen, South China's Guangdong Province.
The company announced in August that it would be opening its first R&D center in Beijing, which will reportedly cost million and include the hiring of 500 employees.
Going forward, there are great prospects for Apple's devices in China, with its rising middle class and growing demand for high-end cell phones in second- and third-tier cities, according to Wang.
Apple's online services such as the App Store, iCloud and Apple Music, which saw 24 percent growth in the fourth fiscal quarter, still have more room to grow in the Chinese market, according to Wang.