Apple Inc. cut its revenue forecast for the first time in two decades. The recent downturn was mostly due to reduced sales in China which have caused a slump for Asian suppliers and lower stock pricings on Wall Street.
Tough Times For Tim Cook’s Apple
In a letter to investors, Apple’s CEO Tim Cook stated that the company had made sales of $84 billion in the year’s last quarter, down from earlier predictions of between $89 and $93 billion. In the first quarter of 2018, Apple reported sales of $88.3 billion; hence, the letter reports the first slowdown in sales since Cook became CEO in 2011. The announcement of the slowdown sent stock plummeting by 8.5%.
The tech giant has been struggling to sell the latest version of the iPhone, its main product, which brings in about two-thirds of revenue. The main drop in revenue was seen in Greater China, which includes large markets like Hong Kong and Taiwan, where customers were unwilling to upgrade their iPhone products.
Wedbush Securities analyst Daniel Ives, reporting in Bloomberg, stated Apple’s downturn was not a shock, but it was the extent of the drop in China. He called it ‘a jaw-dropper’ and the lack of foresight also made investors feel as though they were ‘walking blindfolded’. Wall Street firms have lowered their share price forecast by as much as 15% in the aftermath of Cook’s letter.
Supply Chain Reactions
News of the drop also affected Apple’s tech supply chains, with key suppliers of hardware components in both Asian and European seeing a decline in share price. In Europe, AMS AG and Dialog Semiconductor Plc experienced a decline of 19.4% and 8.5%, respectively. Asian suppliers also saw a decline, with Samsung Electronic Co and Taiwan Semiconductor Manufacturing Co falling by 3% and 1.8%, respectively.
The rising trade war between China and the USA is seen as the main culprit for strained tech supply chains. Trade talks between the US and China will begin next week and there is hope that a positive result will help to ease market volatility.