http://money.cnn.com/galleries/2012/news/economy/1204/gallery.us-companies-in-china/index.html
This is an interesting article as it actually surprised me a little bit when I read it. I never actually expected US companies like Apple to be able to do well in a market like that of China. It is worth noting that in 2009 when Apple's launch of the first iPhone in China was rather a disappointment. This is totally understandable as I have seen knockoff iPhones made in China with my own eyes and I have to tell you that they are not bad at all. Obviously they are not as good as the original but for a fraction of the price of a real iPhone, it is still a good deal. But now Apple's sales in the country have more than quadrupled over the last year alone, totaling $12 billion in 2011. China now makes up about 12% of Apple's total revenue and there are no signs that indicate that number is not going to stop rising. This is maybe a result of good strategies from Apple as Apple CEO Tim Cook told investors, "We've been very, very focused on China."
5 comments:
Linh,
Indeed, interesting article.
Apple reported the slowest profit growth since 2009 on Wednesday and saw the sharpest drop in its share price in 4 years (10%).
Although China may be a large part of Apple’s growth strategy, you might be surprised to hear that Apple is being outsold in China by a company less than 1 percent its size, China Wireless Technologies Ltd (CWT). CWT’s Coolpad retails for just under $100, less than 20 percent the price of the cheapest iPhone. This point highlights how the lack of low-cost products hinders Apple in emerging nations. When asked if a low cost iPhone could be added to Apples product mix, Tim Cook replied, “We just don’t want to go there.”
One might ask the question, WWSD? (What would Steve do)
To both of the previous points, I believe China will prove to be an indispensable portion of Apple's revenue ; however, it will be essential to find a way to compete with less less expensive Coolpads and Android products; As it turns out, Tim cook is a smart guy and returned from meetings this month with top-ranking government officials and executives at Chinese mobile carriers. It appears that striking a deal with China's largest carrier, China Mobile who expects to sell 120 million 3G devices, could put Apple to gain the market share necessary for critical mass.
As for the drop in stock price, could it be the analysts fault? Fortune magazine commented that Apple's performance this past quarter actually posted "the best quarter ever." But when a company fails to exceed predictions or expectations, apparently there are grounds for panic.
Marshall,
I do believe that the analyst are to blame for the sharp decline in apples stock price. Like you mentioned they once again had an outstanding quarter however their price does not reflect that. The analyst's expectations in my opinion are not just. And once the report came out that they have not exceeded the expectations the price lost about $50 in after market trading.
I think that Apple's decision to sell in China is very beneficial to them. Considering that the market in America is slowly declining (possibly due to the lack of innovation), to have a market in a growing economy is helpful. One thing that Apple is thinking of doing is selling the iPhone for a much lower price in China than they do sell it in America. The reason being that people simply cannot afford the iPhone in China. Do you think that, with the bad economic situation in America, if Apple were to lower their prices of products in America, would sales increase?
Rich,
I think that is the fundamental question. The addition of lower priced models to their product mix would certainly expand their market share. But I'm not sure if that is their main concern. From what I've read, Tim Cook seems to be most interested in their gross margin, a metric that would shrink with the implementation of lower cost products.
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