On February 1st, Apple released its financial report, stating that in the first quarter, Apple's China business experienced a rare double-digit drop of 13%, dragging down Apple's stock price by nearly 3%.
China is one of the most important markets for this iPhone manufacturer, second only to the United States. The performance of Apple's China business will directly affect analysts' predictions of Apple's future stock price. Earlier this year, Barclays Bank downgraded Apple's stock rating.
Multiple factors have led to a rare sharp decline in Apple's business in China. External factors include exchange rates and fierce competition in the Chinese market. Over the past quarter, the exchange rate between the US dollar and the Chinese yuan has remained strong; Last year, Chinese manufacturers such as Huawei continued to make efforts in the high-end smartphone field. Huawei launched smartphones equipped with self-developed chips, and other smartphone manufacturers including vivo and Oppo also launched multiple foldable screen products. Currently, Apple is the only major smartphone manufacturer absent from the foldable screen market.
But external factors are only one aspect, and the main reason for Apple's weak iPhone sales is still from within, because in recent years, Apple has not seen disruptive innovative technologies in the smartphone field for a long time. If Apple during the Steve Jobs era was an innovative technology company that could change everyone's life, then today's Apple, although its market value has already exceeded $3 trillion, has had little impact on people's lives. Compared to innovation, it focuses more on how to maintain profits.
From a profit perspective, Apple remains the undisputed "profit champion" in the current smartphone market. According to statistics, the profit of Apple's iPhone accounts for 85% of the global smartphone market, while the combined profit of all other smartphone manufacturers such as Samsung and Huawei only accounts for 15%.
However, any innovation comes with risks, and the failure of innovation means self innovation and an impact on profits. As a $3 trillion giant, Apple must ensure that its innovation is flawless, and this paradox explains why Apple has been cautiously advancing in innovation in recent years.
Since there is a lack of innovation, another gimmick that attracts consumers is price reduction. In the past, Apple almost never conducted promotional activities on official channels in order to maintain its brand image, which was also the bottom line for many luxury brands.
But recently, Apple's sales strategy in China has undergone significant changes. At the beginning of this year, Apple announced a rare price reduction on its official website, ranging from 50 yuan to 800 yuan. This move has also surprised many analysts. Some analysts believe that Apple's official price reduction is more meaningful than substantive, and its effect on boosting sales is limited.
Apple is not the only consumer technology company in China that has adopted a price reduction strategy. Electric vehicle giant Tesla has also encountered a situation of weak sales in the Chinese market, and the two companies are facing similar market environments and challenges.
On February 1, Tesla said on its WeChat official account that Tesla had upgraded the automatic driving hardware HW 4.0 of Model Y cars sold in China. At the same time, Tesla offers a discount of 8000 yuan to users who purchase the designated model of the old Tesla Model Y. Last month, Tesla launched a round of price reductions involving multiple Model 3 and Model Y models.
The upgrade of new features and price reduction of old models are sales strategies adopted by Tesla in the face of increasingly fierce market competition in China. Like the fierce competition faced by Apple, Tesla in China not only faces competition from local electric vehicle giants BYD, as well as emerging manufacturers such as Xiaopeng and NIO, but also from traditional car giants such as Volkswagen. In China, BYD's sales have surpassed Tesla's.
Another similarity between Apple and Tesla is that although both companies sell hardware, what truly sets them apart is their software ecosystem. Although Tesla has not yet officially launched the FSD Beta test version of its autonomous driving software in China, Tesla has not given up its efforts to enter the Chinese autonomous driving market. The updated Model Y autonomous driving hardware HW 4.0 is also paving the way for Tesla to launch autonomous driving software.
Against the backdrop of sluggish sales, both Apple and Tesla are looking towards the next important technology driving growth - artificial intelligence (AI). Tesla CEO Musk sees AI enabled autonomous driving software as a "cash cow" that supports valuation; Although Apple has not yet released any products or software related to generative AI, Cook revealed in the latest earnings call that Apple will have huge opportunities in artificial intelligence and generative AI.
Both Apple and Tesla have once opened up an unprecedented new market, bringing high-tech products to people's lives. However, as more and more competitors enter, as former technology leaders, how to break through oneself becomes the key. After all, consumers expect more from Apple and Tesla than just price reductions.