Apple’s Poor Second Quarter in China

Apple’s sale from the new iPad has been sluggish in the second largest market of China. Analysts have been worried about the performance in the third quarter when Apple’s sales dropped unceremoniously by $2.2 billion to $5.7 billion. Even the launch of the new iPad in China last week did not make a major effect on sales. Queues have been small and there was no frenzy worth mentioning when compared to the rioting scenes observed last year at the launch of the iPhone 4S. Some analysts even feel that Apple is losing its reputation and pull as the most sought after brand in China.

China is an extremely happening market. It has different market dynamics compared to the United States, for examples. Consumers here are known to even reach out and grab the smuggled devices days before they are officially distributed in the market by major manufacturers. As such it is difficult to imagine that Chinese consumers would be waiting to see the arrival of a new Apple device in their Beijing, Hong Kong or Shanghai outlets and not try to go the gray market route. They would also rather go to their competition, such as Samsung, which already has several of its latest Android phones on sale than wait.

The diminishing sales of the iPhone in the last quarter April to June has brought disappointing results not only for Apple, but also for its partners. Asian suppliers such as Taiwan’s Hon Hai and South Korea’s LG Display ended 4 per cent lower in the stock exchange. Japan’s Toshiba on the other hand fell seven per cent.

Tim Cook, Apple’s chief executive, while explaining all this, mentioned that this resulted from “changes in the inventory channel”, which could mean that this did not result from lower sales but accumulated excess stock of the iPhone. Incidentally, the iPhone 5 is scheduled to be launched later in the fall. It could also mean the retailers are more interested in that and cutting down on orders for the iPhone 4S.