Are foldables and generative AI Apple’s weak points?

Apple beat analysts’ expectations during its fiscal first quarter of 2024 (ending December 30, 2023), which saw iPhone sales rise despite a double-digit decline in the company’s revenue in China. However, the outlook for 2024 is not encouraging, as terminal sales are expected to decline.

Revenue in China has seen a 12.9% decline year-on-year and stands at $20.8 billion (about 19.4 billion euros).

Apple CEO Tim Cook reported in an earnings call that iPhone sales declined by about 5% in constant currency terms. “I am still very optimistic about China in the long term… We are pleased to reach a significant number of new established parks.”

Kuo Ming-chi, an analyst at TF International Securities, said in his blog that iPhone sales will decline by about 15% for the full year based on a supply chain study, which indicates that Apple has reduced orders for its semiconductor components. Have reduced. Up to about 200 million units.

The analyst says the iPhone faces “structural challenges” that will lead to a significant decline in sales in 2024, and points to foldable models and the lack of generative AI functionality as significant weaknesses for Apple.

steady decline

Kuo points out that weekly iPhone sales in China have declined by 30-40% over the past few weeks. He believes this trend will continue due to the comeback of Huawei smartphones and the fact that folding phones have become the preferred choice for high-end users in the country.

Canalys analyst Chiu Le said Apple has not yet responded to the challenge.

The analyst believes that simply incorporating generative AI will not be enough to meet the growing demand for AI functionalities.

“If Apple wants to maintain its reputation as a leader in hardware it must invent new use cases.”

On the other hand, Kuo points out that Samsung has raised its sales forecast for the model by 5-10%. Galaxy S24 with Google AI For 2024, while Apple has revised downwards the expectations placed on the iPhone 15 for the first half.

He believes Apple will not release iPhone models with significant design changes or more extensive generative AI applications until at least 2025.

Canalys senior analyst Toby Zhu pointed out in a recent report that investing in AI for high-end devices is a strategic direction for manufacturers, noting that Samsung will incorporate generative AI into its long-term product strategy, while Xiaomi, Vivo, Oppo and Honor have already launched compatible flagship devices in China.

Although the past year has been difficult for global mobile phone manufacturers, Apple expects to expand its market share in 2023 stood at the bedside With a share of 20% in sales for the first time, according to Canalys data.

Sales fell 1% to 229.2 million units and Chinese brands declined even more.

Samsung shipped 225.4 million units.

pessimistic forecast

However, Apple has started the year with bad signs, as analysts at Jefferies predict a double-digit decline in the volume of iPhones sold in China in 2024, although the manufacturer has launched a number of models ahead of the Lunar New Year. The price has been reduced.

As the global smartphone market shows signs of improvement, Apple’s prospects are looking bleak. Thus, Canalys reports an 8% increase in sales in the fourth quarter of 2023, reaching 319.5 million units.

You have to wonder whether Apple will need foldable iPhones and generative AI to remain on top in the global market, or whether these will prove to be its weakness in China.

Revenue for the first fiscal quarter of 2024 increased by 2.1% to $119.6 billion (about €111.46 billion), compared to Apple’s negative growth during the previous four quarters.

Sales increased in all regions except Greater China. In the rest of Asia, revenues rose 6.6% to $10.2 billion (about 9.5 billion euros) and in Japan 15% to $7.8 billion (about 7.3 billion euros).

According to Cook, India has recorded double-digit growth, reaching a quarterly record.

The shortcomings cited by Kuo do not appear to represent a problem in India. Thus, Sanyam Chaurasia, senior analyst at Canalys, told MWL that the strong demand in the country is generally driven by the previous generation iPhones, ease of financing, pressure from retailers and growth in the high-end segment. happened. disposable income.

Investors fear that the continued weakness in China will impact Apple’s global results.

Over the next few quarters, it will be seen to what extent Apple’s third-largest market after the American continent and Europe is important to the company’s results and returning its market capitalization above $3 trillion (about 2.8 billion euros).