Just as Apple Inc. CEO Tim Cook was preparing to head to China later this month to try to improve his company’s relationship with the Chinese government, a Beijing court ruled that China’s Xintong Tiandi is free to use the “iPhone” trademark.
With the company’s iPhone sales down 26 percent in China this year, and communist regulators shuting down Apple’s iBook Store and iTunes on April 21, Cook had planned to “meet senior government and Communist Party leaders — including officials in charge of propaganda,” according to sources at Reuters.
Thomas Husson, an analyst with Forrester Research, told eWeek.com that the most significant issue associated with Cook’s visit is addressing how Apple has “doubled down on privacy.” He added, “There might be some regulations coming down in the Chinese market. That would make sense to me.”
In 2015, Apple was on a roll in China, with the company’s smartphone market share jumping from 8.8 percent in 2014 to 13.4 percent in 2015. Chinese consumers named Apple their favorite luxury brand, taking top honors away from Gucci and Louis Vuitton. Apple’s success was even more impressive given that cell phone sales only rose by only 2.5 percent to 434 million units.
In January, Apple reported $18.37 billion in revenue from China in its first quarter of 2016, which made up about 24.2 percent of the company’s $75.87 billion in revenue for the quarter. In the fourth quarter of 2015, Apple reported $12.52 billion in China revenue, according to earlier eWeek reports.
But 2016 has proven to be a difficult year, with Apple reporting its first drop in iPhone sales, driven in part by a 26 percent fall in sales in the Chinese market to $12.5 billion. The company’s stock is down by 30 percent, from a $134-per-share high in May 2015, to a low of $92.51 on May 11.
Rob Enderle, head of research for the Enderle Group, warned, “Thanks to the Snowden disclosures, U.S. technology is broadly distrusted and the recent actions between the FBI and Apple have only fueled that fire, so [Communist] Party leaders [in China] have largely stopped using any U.S.-built technology and Apple products aren’t held in as high esteem as they once were.”
Apple will undoubtedly appeal its trademark loss to the Chinese Supreme People’s Court. But only a dramatically better relationship with Communist Party leaders can help Apple’s sales get back on track in China.