28/04/2020
SHANGHAI (Reuters) – Apple Inc’s (AAPL.O) discounts on the iPhone 11 in China and the release of a new low-price SE model have put the company in a better position than rivals to weather a coronavirus-related plunge in global smartphone demand.
While China, which accounts for roughly 15% of Apple’s revenue, appears to be a rare bright spot, investors will be keen to get a picture of global demand when the Cupertino, California-headquartered company reports second-quarter results on Thursday.
The iPhone maker has shut retail stores in the United States and Europe following the COVID-19 outbreak, and China is the only major market where it has been able to reopen all shops.
Consumer spending is expected to be muted as the pandemic has crippled economies and Apple, the world’s second-most valuable tech company, is better armed with the launch of its new price-conscious iPhone model, analysts said.
“Apple is better positioned than most to experience a rapid recovery in a post COVID world,” Evercore analyst Amit Daryanani said in a research note. “We see demand as pushed out, not canceled.”
He added that the launch of the $399 iPhone SE suggested that Apple’s supply chain was getting back on its feet after weeks of shutdown earlier this year.
Analysts expect Apple to report a 6% drop in revenue and an 11% fall in net income in its fiscal second quarter, according to Refinitiv data.
On the other hand, Chinese brands such as Oppo and Vivo who have steadily moved to offer high-end models to challenge iPhones, stand to lose marketshare as bargain hunters choose Apple.
Earlier this month, several online retailers in China slashed prices of the iPhone 11 by as much as 18% – a tactic Apple has used in the past to boost demand. And while initial social media reaction to the new iPhone SE was muted, analysts said they were seeing a pick up in demand.
The cheaper iPhone SE could tempt iPhone owners to opt for a newer device, something they might have otherwise delayed in a weak economy, said Nicole Peng, who tracks the smartphone sector at research firm Canalys.
“People want to avoid uncertainty in a downturn,” she said. “Having a brand like Apple that can showcase quality and make people less worried about breakdowns or after-sales service can bring in buyers.”
CHEAP IS GOOD
Early data suggests that the Chinese smartphone market is recovering rapidly in the aftermath of the virus, and Apple has emerged relatively unscathed.
Sales of iPhones in China jumped 21% last month from a year earlier and more than three fold from February, government data showed, meaning March-quarter sales in the country were likely to have slipped just 1%.
To be sure, a recovery in Chinese demand won’t offset sales lost in the United States and Europe. And the company is yet to launch a smartphone enabled with 5G wireless technology like those offered by Asian rivals, a disadvantage for Apple so far.
But those same expensive 5G models may not sell well in the current climate of frugality, analysts said.
“If there are no massive subsidies (in China), I doubt there will be many smartphone users who will be eager to upgrade to 5G,” said Linda Sui, who tracks the smartphone sector at research firm Strategy Analytics.
Sui expects iPhone shipments in 2020 to be down 2 percentage points at the most, versus double digit declines at Chinese firms.
Apple also has revenue from its services business to fall back on. It has leveraged its large iPhone customer base to boost services revenue from music, apps, gaming and video.
“Apple’s Services segment should remain resilient in today’s work-from-home environment, thereby demonstrating the durability of Apple’s model,” Cowen analyst Krish Sankar said.
Source: Reuters
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02/03/2020
BEIJING (Reuters) – Tens of thousands of ethnic Uighurs were moved to work in conditions suggestive of “forced labor” in factories across China supplying 83 global brands, and Australian think tank said in a report released on Sunday.
The Australian Strategic Policy Institute (ASPI) report, which cited government documents and local media reports, identified a network of at least 27 factories in nine Chinese provinces where more than 80,000 Uighurs from the western region of Xinjiang have been transferred.
“Under conditions that strongly suggest forced labor, Uighurs are working in factories that are in the supply chains of at least 83 well-known global brands in the technology, clothing and automotive sectors, including Apple, BMW, Gap, Huawei, Nike, Samsung, Sony and Volkswagen,” the think-tank said in the introduction to its report.
The ASPI report said the transfers of labor were part of a state-sponsored program.
It says the workers “lead a harsh, segregated life,” are forbidden to practice religion, and are required to participate in mandarin language classes.
It also says the Uighurs are tracked electronically and restricted from returning to Xinjiang.
China’s Foreign Ministry on Monday said reports the government had violated the Uighurs’ rights were untrue.
“This report is just following along with the U.S. anti-China forces that try to smear China’s anti-terrorism measures in Xinjiang,” spokesman Zhao Lijian at a regular press briefing on Monday.
The United Nations estimates over a million Muslim Uighurs have been detained in camps in Xinjiang over recent years as part of a wide-reaching campaign by Chinese officials to stamp out terrorism.
The mass detentions have provoked a backlash from rights groups and foreign governments, which say the arbitrary nature of the detentions violates human rights.
China has denied the camps violate the rights of Uighurs and say they are designed to stamp out terrorism and provide vocational skills.
“Those studying in vocational centers have all graduated and are employed with the help of our government,” said the Foreign Ministry’s Zhao, “They now live a happy life.”
The 83 global brands mentioned in ASPI’s report either work directly with the factories or source materials from the factories, it said, citing public supplier lists and the factories’ own information.
One of the factories, O-Film Technology Co Ltd, which has manufactured cameras for Apple Inc’s (AAPL.O) iPhones, received 700 Uighur laborers as part of the program in 2017, a local media article cited by the report said.
Apple referred Reuters to an earlier statement that said “Apple is dedicated to ensuring that everyone in our supply chain is treated with the dignity and respect they deserve. We have not seen this report but we work closely with all our suppliers to ensure our high standards are upheld.”
The other companies mentioned in the introduction to ASPI’s report – BMW (BMWG.DE), Gap Inc (GPS.N) , Huawei Technologies Co Ltd, Nike Inc (NKE.N), Samsung and Sony Corp (6758.T) did not respond to requests for comment on Monday.
O-Film Technology did not respond to a request for a comment either.
Volkswagen told Reuters in a statement that none of the listed companies is a direct supplier. It said the company holds “direct authority” in all parts of its business and “respects minorities, employee representation and social and labor standards.”
The report said a small number of the brands, including Abercrombie & Fitch Co [ANF.N], advised vendors to terminate their relationships with these companies in 2020, and others denied direct contractual relationships with the suppliers.
ASPI describes itself as an independent think-tank whose core aim is to provide insight for the Australian government on matters of defense, security and strategic policy.
Source: Reuters
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