The Croesus-like revenue typically seen in Apple’s quarterly earnings can be a little blinding at times. When your revenue is regularly above $40 billion every three months, it’s easy to see single digit fluctuations as rounding errors. But in the end, these large overall numbers can often hide local fluctuations that would otherwise change the narrative around the Cupertino giant.
Ben Thompson points as much out, outlining Apple’s problems in China. In Q2 2015, China was Apple’s second biggest market market, generating $16.8 billion in revenue. Two years later, revenue is down almost 40%, and now well below the European market.
Ben sees the reason for this as a lack of typical Apple consumer lockout in the market. WeChat is the great equalizer in China, not just for messaging, but filling economic functions as well. As a result, its harder for Apple to differentiate on hardware alone, as other major competitors have to a large degree caught up.
It’s easy to miss this when Apple seemingly dumps another truckload of gold into their Scrooge McDuck cash reserve vault every earnings call. But if Apple is unable to adapt to a substantially different market, they could end up getting locked out themselves.
Ben Thompson comments:
Did you hear about the new Microsoft Surface Laptop? The usual suspects are claiming it’s a MacBook competitor, which is true insomuch as it is a laptop. In truth, though, the Surface Laptop isn’t a MacBook competitor at all for the rather obvious reason that it runs Windows, while the MacBook runs MacOS. This has always been the foundation of Apple’s business model: hardware differentiated by software such that said hardware can be sold with a margin much greater than nominal competitors running a commodity operating system.
Read more at: Apple’s China Problem