Chindia Alert: You’ll be Living in their World Very Soon
aims to alert you to the threats and opportunities that China and India present. China and India require serious attention; case of ‘hidden dragon and crouching tiger’.
Without this attention, governments, businesses and, indeed, individuals may find themselves at a great disadvantage sooner rather than later.
The POSTs (front webpages) are mainly 'cuttings' from reliable sources, updated continuously.
The PAGEs (see Tabs, above) attempt to make the information more meaningful by putting some structure to the information we have researched and assembled since 2006.
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.
Apple’s chief executive Tim Cook said the company would open its first physical stores in India in 2021 and a online outlet later this year.
Apple had to seek special approval from the Indian government to open a store without a local partner.
The announcement was made at the company’s annual shareholders’ meeting.
Investors at the meeting also voted on a proposal that the firm should alter how it responds when governments ask it to remove apps from its marketplace.
Though the measure wasn’t approved, it failed by a slimmer margin then similar proposals in the past.
Apple’s move into India, the second largest smartphone market in the world, has been expected for some time, but the announcement of a date was new.
In 2018 India changed the laws that prevented foreign brands from opening single-brand stores in the country. Nevertheless Mr Cook said India had wanted Apple to open its store with a local partner.
Mr Cook told investors he didn’t think Apple would be a “good partner”.
“We like to do things our way,” he said.
Apple sells its products through third-party stores in India at the moment. But its sales lag competitors Samsung and Huawei.
With demand for Apple products slowing in China – even before the outbreak of Coronavirus – the firm is hoping it can spur growth in other developing markets like India.
Human rights vote
Apple investors also voted on a proposal meant to change the way the company handles requests by governments to remove applications from its App Store.
The proposal would have forced Apple to publicly commit to respecting “freedom of expression as a human right.”
The measure was tied to Apple’s removal of apps by the Chinese government, including an app that allowed protestors in Hong Kong get around China’s internet restrictions.
Supporters of the measure said Apple was complicit in Chinese human right abuses when it gave in to requests to remove these types of apps.
The measure was voted down but received nearly 40% of the vote.
Similar measures have been proposed in the past but have never received as much support.
Two shareholder advisory groups, Glass Lewis and Institutional Shareholder Services recommended voting in favour of the proposal.
Coronavirus concerns
Mr Cook also addressed the impact that coronavirus is having on Apple’s operations.
The tech giant warned investors early this month that it expected to miss its quarterly earnings estimate because of the outbreak. Many of the Chinese plants that make components for Apple products – like its iPhones and MacBook laptops- have been closed or operating at with limited capacity to reduce the spread of the disease.
The shareholders meeting also allowed investors to ask Apple executives questions about the company’s other development.
One investor asked why the company had not bought the rights to the upcoming reunion of the TV show Friends – which is slated for HBO Max.
Mr Cook said a spinoff would not be keeping with the brand of Apple TV Plus – which is focused on original content.
A farmer picks apples at a fruit and vegetables specialized cooperative in Nanhai New Area of Weihai, east China’s Shandong Province, Oct. 23, 2019. (Xinhua/Guo Xulei)
CHINDIA ALERT: You'll be living in their world, very soon 