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Apple Faces Hostility In China; 2016 First Quarterly Earnings Drop

By Chandan Das , May 03, 2016 04:06 AM EDT
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Until recently, a large chunk of Apple's earnings came from the China market. But all this changed in the first quarter of 2016 when the Cupertino tech giant witnessed a 13 percent revenue decline in 13 years.

Greater China, including Hong Kong and Taiwan, accounted for about 58 percent of the drop in quarterly earnings -- highlighting the brunt of the crammed Chinese smartphone market on international gadget manufacturers, the Wall Street Journal reported. Contrary to Apple CEO Tim Cook's belief that the recent currency appreciation in Hong Kong is responsible for the fall, experts are of the view that the smartphone market saturation in Mainland China has been responsible for the dismal results.

For most American technology firms in China, capturing market was not only difficult, but if they succeeded in seizing a sizeable market share or wielded much influence, Beijing pushed them back. However, things were different for Apple in China, where the company has basically been an exception to this trend. In fact, the country is still the second largest global market for the company's products and services.

Now, the company is experiencing regulatory pressure against its services in the Communist nation, perhaps signaling the beginning of the end of a good relationship between the company and Chinese authorities. Mid-April, the Chinese government unplugged two Apple services. Precisely speaking, the powerful State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) shut down Apple's iTunes Movies and iBooks.

However, most people are of the view that Beijing's policy is not targeted particularly at Apple, but an attack on all foreign companies operating on Chinese soil and it is a part of Beijing's "policing content" policy. The move is possibly not aimed at Apple, as the Cupertino tech titan is basically hardware driven and content is not its lifeblood, Forbes quoted John Butler of Bloomberg Intelligence saying.

According to the report, even this may be news to Cook, as the two services are very crucial for Apple, as they helped to draw users to the company's ecosystem, which is currently facing problems. In the last quarter of 2015, Apple was the No. 1 smartphone vendor in China, but its position slipped to No. 3 in the first quarter of 2016, with Huawei Technologies and Xiaomi Corp. surpassing the shipments of the American tech behemoth.

Watch the video on "Apple's manufacturing in China: Key issues" below:

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