Apple (AAPL) is in the midst of what can generously be called a “difficult” period. The company is battling a high-profile antitrust battle with the Justice Department, declining iPhone sales in China and regulatory scrutiny in the European Union. These are just the headlines from last week.
The company also still faces gaps when it comes to generative AI capabilities. And while the company is widely expected to unveil some kind of generative AI product at its WWDC developer event on June 10th, it will likely need some pretty impressive generative AI products to keep up with Big Tech rivals like Microsoft (MSFT) and Google. You will need to show performance. (Google, Google).
All of this is having a negative impact on Apple's stock price. Shares of the iPhone maker have fallen more than 7% since the beginning of the year and have risen just 6.25% over the past 12 months. Meanwhile, Microsoft stock is up 14% since the beginning of the year and 49% over the past 12 months. Google? The search giant's stock is up 9% since the beginning of the year and 43% over the past 12 months.
Suffice it to say, Apple's 2024 isn't going well.
Apple's China problem
Apple's latest troubles came on Tuesday when Bloomberg reported, citing Chinese government data, that iPhone shipments in the country fell 33% in February from a year earlier.
China is Apple's third largest market after North America and Europe. In 2023, the region accounted for $72.6 billion of Apple's total revenue of $383.3 billion. This is equivalent to approximately 19% of the company's sales.
And this is not entirely sudden. Earlier this month, Counterpoint Research reported that domestic iPhone sales were down 24% year over year through the first six weeks of 2024. Overall smartphone sales in China decreased by 7% during the same period.
Apple has been expanding aggressively in China for years, but Huawei's resurgence and China's tough economic conditions are weighing on device sales. However, the company is not just sitting idle. Last week, CEO Tim Cook flew to China to open the company's newest flagship store in Shanghai. He was also scheduled to attend the China Development Forum in Beijing and meet with President Xi Jinping.
According to the South China Morning Post, Apple's authorized retailers are also trying to lower prices on the company's latest iPhones in hopes of getting consumers to start buying again. However, lowering prices may not be enough to achieve that.
Battle with the Department of Justice
Beyond Apple's China sales scandal, the company is also facing a long-awaited antitrust battle with the Justice Department. The lawsuit, filed last Thursday by the Department of Justice, accuses Apple of crowding out competing apps and devices and illegally maintaining its dominance in the premium smartphone market.
The Justice Department says Apple is imposing restrictions on app developers, making it difficult for users to switch to competing platforms and hindering cloud gaming and so-called super apps that allow users to access multiple smaller apps from one large platform. claims.
But Apple has fought back, saying the lawsuit “threatens who we are and the principles that differentiate Apple products in a fiercely competitive market. “This will hinder our ability to develop technology,” it said in a statement. apple. “
The Justice Department is trying to force Apple to change its business practices by giving third-party apps more access to its platform and requiring Apple to expand compatibility with third-party device manufacturers. may mean.
The lawsuit could also be a dangerous distraction for Apple, just as Microsoft's antitrust battles in the 1990s distracted executives from emerging technologies such as smartphones. If Microsoft hadn't been so invested in fighting antitrust laws at the time, it's entirely possible that it would have foreseen the arrival of the smartphone era and released its own line of devices, just like Apple and Google. It is in.
European Commission call
In addition to slowing iPhone sales in China and the Justice Department's antitrust case, the European Union's competition watchdog, the European Commission, said on Monday it was investigating Apple's compliance with the bloc's digital market law. Announced.
In a statement on Monday, the commission said it was investigating Apple's new app pricing structure in the EU, as well as whether it complied with user choice obligations related to the ability to remove default and preinstalled apps. .
The Digital Markets Act requires Apple to open the iPhone to third-party app stores, allowing developers to cut around 30% and 15% of the fees the company charges when selling through its App Store. be able to obtain it. Apple has announced that it will allow these third-party stores, but will charge developers a core technology fee of 50 euro cents per year per install for apps that have been installed more than 1 million times in the past 12 months. Announced.
The EC said in a statement that it is investigating whether Apple's new fees violate the objectives of the Digital Markets Act obligations.
Apple is certainly facing a number of challenges, but it's not down. The company remains the world's second-richest company by market capitalization after Microsoft, and is certain to continue selling millions of devices and service subscriptions every year.
Still, Apple could find itself in a difficult situation in the near future.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter @Daniel Howley.
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