Apple’s bet that Chinese consumers would rush to buy massive numbers of iPhones appears to have imploded as the tech leader has cut supplier parts orders by 30 percent.
Apple’ss stock fell by $3 to $102 on January 5 after the Nikkei Asian Review reported that with iPhone 6S and 6S Plus models ballooning on retail shelves in China and Europe, the company was forced to slash parts demand by almost a third versus last year.
Breitbart News warned on July 10, with Apple’s stock price at $124 a share, that the international dominance of Apple’s iPhone was at risk from the long-term impacts of China’s stock market crash, which saw prices fall by 40 percent over a 10-week period.
We pointed out at the time that Apple’s growing dominance in the “Red Dragon” was due to huge investments by the company to make iOS and Mac OS X easier for Chinese language users. Many of the upgrades at Apple Worldwide Developers Conference 2015 were optimized specifically to target Chinese users.
The company also embarked on a crash program to build 40 retail stores and Genius Bar help desks in premium retail spaces in an effort to portray Apple as an aspirational brand.
Despite losing significant market share in the rest of the world, Apple’s strategy of betting the farm in China had seemed brilliant through the month of May. China’s “Silk Road” domestic reforms, aimed at expanding consumption by taking hundreds of state-owned-enterprises public, had caused 150 percent gain in the nation’s stock markets over the past year.
With the number of retail brokerage accounts for Chinese investors exploding up from 20 million to about 100 million accounts, the ultimate status symbol in China had become watching live stock prices on the iPhone 6.
The China stock indexes tumbled by 41 percent and wiped out $5 trillion in value in a three-month period this summer. Goldman Sachs just estimated that the Chinese government had to spend $236 billion and ban selling by major shareholders to stabilize markets. But the international brokerage firm is worried that with China now owning the equivalent of 9.2 percent of China’s freely-traded stock shares, the stock markets are at risk of crashing again if the government tries to sell.
Despite the summer’s turmoil, Apple announced on October 27 that for the year ending September 30, the company achieved 99 percent year-over-year revenue growth in China. Apple CEO Tim Cook triumphantly told institutional investors later in the day that he anticipates the Greater China region, currently accounting for 24 percent of sales, will become “Apple’s top market in the world.”
Despite all the company’s positive spin, Apple’s stock is now in a “bear market.” It just made an annual low, down 23 percent from its July high.
With Apple’s stock appearing to carve out what some traders are calling a very dangerous “head and shoulders trading pattern,” a re-acceleration of the China stock crash represents a huge downside risk to Apple shareholders.