Apple beat analyst expectations in its fiscal Q1 2024 (the period to 30 December 2023), with iPhone sales growing despite a double-digit drop in revenue in China, but the outlook for 2024 is turning negative with forecasts of a decline in handset shipments.
Revenue in China dropped 12.9 per cent year-on-year to $20.8 billion.
CEO Tim Cook said on Apple’s earning call that iPhone sales were down by a mid-single digit percentage in constant currency terms. “I remain very optimistic about China over the long term…I feel good about hitting a new install base number”.
In a blog, TF International Securities analyst Kuo Ming-Chi predicted full-year iPhone shipments will decline about 15 per cent, based on a supply chain survey indicating Apple lowered its upstream semiconductor component orders to about 200 million units.
He added the iPhone faces “structural challenges” which will lead to a significant decline in shipments this year, pointing to the lack of foldable models and generative AI (GenAI) features as key weaknesses for Apple.
Continued decline
Kuo claimed weekly iPhone shipments in China declined by 30 per cent to 40 per cent in recent weeks, with the trend expected to continue due to the return of Huawei smartphones and the fact foldable handsets have become the first choice for high-end users in the country.
Canalys analyst Chiew Le Xian told Mobile World Live (MWL) with slowing innovation in the high-end segment, foldables represent Android brands’ attempt to rejuvenate premium smartphone demand and noted Apple is yet to respond to this challenge.
He added merely incorporating GenAI is not enough to meet rising demand for AI features.
“Apple must innovate new use cases to maintain its reputation as a leader in hardware.”
Samsung increased its shipment forecast for the Google AI-equipped Galaxy S24 model in 2024 by 5 per cent to 10 per cent, while Apple revised its iPhone 15 expectations down for the first half, Kuo noted.
He suggested Apple will not launch iPhone models with significant design changes or more comprehensive GenAI applications until 2025 at the earliest.
In a recent report, Canalys senior analyst Toby Zhu explained investing in on-device AI for the high-end segment is a strategic direction for vendors, noting Samsung will incorporate GenAI in its long-term product strategy, while Xiaomi, Vivo, Oppo and Honor have already released compatible flagship devices in China.
Despite a challenging year for global handset vendors, Apple gained market share and took the top position by shipments for the first time in 2023 with a 20 per cent share, Canalys data showed.
Shipments fell 1 per cent to 229.2 million units, with Chinese brands recording larger declines.
Samsung shipped 225.4 million units.
Downbeat forecast
But Apple started the year on a bad note, with Jefferies analysts forecasting a double-digit drop in iPhone volumes in China in 2024 as the vendor cut the price of some models ahead of the Lunar New Year.
The outlook for Apple is dimming just as the global smartphone market shows signs of recovery, with Canalys reporting shipments growth of 8 per cent to 319.5 million units in Q4 2023.
The question is does Apple need a foldable iPhone and GenAI to stay at the top of the global market, or are those just its Achilles heel in China?
Revenue in its fiscal Q1 2024 rose 2.1 per cent to $119.6 billion after Apple posted negative growth over the last four quarters.
Sales were up in all regions except for greater China. In the rest of Asia revenue grew 6.6 per cent to $10.2 billion and 15 per cent in Japan to $7.8 billion.
India recorded double-digit growth, hitting a quarterly record, Cook said.
The shortcomings highlighted by Kuo have not emerged as obstacles in India: Canalys senior analyst Sanyam Chaurasia told MWL strong demand in the country is generally driven by older-generation iPhones, with growth in the premium segment aided by easy financing, retailer push and rising disposable income.
Investors fear continued weakness in China will weigh on Apple’s overall results.
The next few quarters will show how vital Apple’s third-largest market after the Americas and Europe is to its bottom-line and any chance of moving its market capitalisation back above $3 trillion.
The post Analysis: Are foldables, GenAI blind spots for Apple? appeared first on Mobile World Live.
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