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China's anti-Apple campaign estimated to cost Apple $13 billion in sales

post #1 of 37
Thread Starter 
China's recent state-sponsored, anti-Apple campaign might not just be empty rhetoric: it could, according to one estimate, cost Apple $13 billion in sales in the country.

ni hao


Citi's Glen Yeung examined on Monday the financial impact of previous Chinese state-sponsored campaigns against other companies. China's government has instituted similar pushes against YUM Brands (part of KFC), Toshiba, and Hewlett-Packard. The negative press led to YUM Brands taking a 20 percent year-over-year sales hit in China for January and February, while Toshiba lost its No. 1 spot in Chinese notebook sales following a 1999 state-media report that the Japanese manufacturer treated Chinese and American customers differently.

Yeung chose HP as a template for the potential damage of such a campaign to Apple (via CNN):

Recall that a similar campaign hit HP in 2010, leading to a ~50% reduction in their PC share in China. Apple derives ~16% of its sales in China (CY12) and China accounted for ~24% of Apple's revenue growth in the past 2 years (2010-2012). If Apple were to lose as much as 50% of their China market share, this would equate to ~$13.1B/$3.62 in revenues/EPS. We add this to our list of concerns about Apple's market share dominance and still do not recommend the shares at this time.



Yeung's report went on to discuss the difficulties the negative campaign could produce for Apple's efforts to get the iPhone onto China Mobile, the world's largest wireless carrier. More important than that, though, would be the potential impact on apple's brand value. Those factors in mind, Citi could not recommend buying Apple shares at the time, and the firm stood by its December decision to downgrade its Apple rating to Neutral.

China just this year surpassed the United States as the largest market for smartphones and tablets, and Apple has been moving to make its products more affordable in that increasingly important market.

Apple CEO Tim Cook on Monday issued an apology for the Chinese warranty issues that appear to have sparked the Apple backlash, even while the effectiveness of the campaign remains unknown. Cook blamed "misunderstandings" stemming from Apple's lack of public communications and offered the company's "sincere apologies."

Cook's letter also came with four major adjustments to Apple's warranty policy in China. Those included increased supervision and training for Apple Authorized Service providers, a new feedback system, a "concise and clear" statement on its website about repair and warranty policies, and new policies for the iPhone 4 and iPhone 4S.
post #2 of 37
Doubt it - the Chinese people don't believe the government in this case, and Apple is still such a high status item that one Chinese teenager sold a kidney to get an iPad.
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post #3 of 37

Breaking: made up crap about made up crap expected to do a made up amount of damage to Apple.

Originally Posted by asdasd

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Originally Posted by asdasd

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post #4 of 37

Is 13 Billion really that much?

 

With the way that Apple's stock has been going, 13 Billion is nothing compared to how much money has left Apple.

post #5 of 37
Analyst: another name for a side-show fortune teller only not as accurate.

Sure, $13 billion. Why not $13 trillion? I can pick all sorts of numbers out of the air, too!

Wait a minute. What's today's date? I get it. This is all just a joke called "let's manipulate the stock price down so we can buy it cheap and then sell it really, really high while costing investors billions!"
post #6 of 37
Quote:
Originally Posted by Apple ][ View Post

Is 13 Billion really that much?

 

With the way that Apple's stock has been going, 13 Billion is nothing compared to how much money has left Apple.



Even for Apple, that is a huge amount, a 8% hit to earnings and revenue.  If it happened for real, it would probably take Apple stock down $50 to $100, but it won't happen for real.

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post #7 of 37

Apple has in my experience, having lived in Hong Kong a number of years,  an absolute cult following in China.

 

Should the Chinese government start to bar Apple from doing business in China, it can always pull out some of its production and relocate it to for example the US, where it would get cred for having environmentally friendly efficient made in the US production.

 

Meanwhile some of the best paid manufacturing jobs in China would disappear with possible civil unrest as a result.

post #8 of 37
It's nonsense to think that the only reason Apple is highly regarded in China is because the Chinese government makes it so. It's equal nonsense to think that if the Chinese government pans Apple it's going to automatically lose sales. In fact, the argument could be made that it will make Apple even more desirable!
post #9 of 37
Quote:
Originally Posted by e1618978 View Post

...Apple is still such a high status item that one Chinese teenager sold a kidney to get an iPad.

Sad too:
"He was paid his 22,000 yuan (about $3400) right after the removal. He then went home. His mother questioned him after he showed up with a brand-new Apple tablet, and he confessed to her that he'd sold his kidney. She immediately contacted the police (by the way, selling organs on the black market is totally illegal), and they opened an investigation. They were unable to contact the agents Zheng had worked with -- because said agents' phones were mysteriously always switched off.
Zheng has since had post-surgery issues -- the hospital, after all, was reportedly not qualified to perform an organ transplant. The hospital also claimed they had no knowledge of the surgery, though they did admit to contracting out the urology department to a Fijian businessman. That's not sketchy at all.

The case remains under investigation, and Zheng's health continues to deteriorate."
melior diabolus quem scies
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post #10 of 37

Cmparing HP to Apple?

 

Really?

post #11 of 37
If Tim Cook is not working to move Apple manufacturing out of China, he is a fool.
post #12 of 37
Quote:
Originally Posted by ktappe View Post

If Tim Cook is not working to move Apple manufacturing out of China, he is a fool.

Unfotunately Apple's supply chain situated in China is really huge. If at all, there can only be a stepwise and very slow move out of China. Moreover, I don't think, that Chinas threat will have more consequences, than a short time dive of AAPL.

Since Apple is doing really well, the stock will recover rather sooner than later.

post #13 of 37
Quote:
Originally Posted by Apple ][ View Post

Is 13 Billion really that much?

 

With the way that Apple's stock has been going, 13 Billion is nothing compared to how much money has left Apple.


"13 B here and 13 B there, and pretty soon we're talking about real money...."

An iPhone, a Leatherman and thou...  ...life is complete.

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An iPhone, a Leatherman and thou...  ...life is complete.

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post #14 of 37
Hello Vietnam, Thailand and Cambodia,
Any interest in having electronic assembly plants built in your country? We have cash to spend!

Signed,
Tim Cook
post #15 of 37
"If Apple were to lose as much as 50% of their China market share..."

Apple is not HP in 2010, and it's not Taco Bell.
post #16 of 37

I'm not sure it's the manufacturing that's the point of vulnerability: it's the access to the consumer market in China.

 

Granted were it up to me (and they may very well be doing this) I'd be making the very point of all that Apple's manufacturing orders contribute to the Chinese economy, and that they ARE transferable....

 

China's standard price to sell in that market is manufacturing there (as it is with Brazil): but the manufacturing is already there so it's a little bit more complex. Unless the issue is either with the United States as whole, with Apple as the whipping boy.

post #17 of 37

The proof of the pudding will be in gaining permission to sell with China Mobile: which I get the impression is what the 5s is going to bring to the table, amongst other things.

post #18 of 37
Free publicity for Apple; it'll probably make them a couple of extra billions.
post #19 of 37

As the Chinese consumers shift to Huawei, Lenovo and Samsung smartphones, Apple will lose more market share in the world's largest market.

post #20 of 37
Quote:
Originally Posted by ktappe View Post

If Tim Cook is not working to move Apple manufacturing out of China, he is a fool.


Tim Cook will not move Apple manufacturing out of China. Apple needs China as it competes with the leader Samsung and the others.

post #21 of 37
Originally Posted by peter236 View Post
As the Chinese consumers shift to Huawei, Lenovo and Samsung smartphones, Apple will lose more market share in the world's largest market.

 

You say this as though it's happening.

Originally Posted by asdasd

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Originally Posted by asdasd

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post #22 of 37
Quote:
Originally Posted by Apple ][ View Post

Is 13 Billion really that much?

 

With the way that Apple's stock has been going, 13 Billion is nothing compared to how much money has left Apple.

13 billion is a significant amount of money no matter how you twist it. 

post #23 of 37
Quote:
Originally Posted by flyingviking View Post

Apple has in my experience, having lived in Hong Kong a number of years,  an absolute cult following in China.

 

Should the Chinese government start to bar Apple from doing business in China, it can always pull out some of its production and relocate it to for example the US, where it would get cred for having environmentally friendly efficient made in the US production.

 

Meanwhile some of the best paid manufacturing jobs in China would disappear with possible civil unrest as a result.

It seems like Chinese Government is trying to have its cake and eat it too…  They like:

 

• Having Apple's Manufacturing Jobs - Foxconn, and other "Conns":) [yes pun intended]…  

• Helping their China Mobile get an even better deal out of Apple 

 

Is also possible that Chinese Government Officials want to see AAPL down, so that they can Buy it for themselves? I know it might sound like a conspiracy theory, but it's been fashionable among the dictators, and other politicians in less than free countries to buy properties outside their own countries, and park their money in Swiss Banks, or Cyprus Banks etc! They also like to keep some of their domestic profits in those foreign banks! Such transactions could be under fictitious names, so to avoid prosecution in their own countries! 

 

I am not a huge fan of conspiracy theories, but it'd be great if someone at Apple looked into all such possibilities!

 

If Apple was to find any hint of such "smoke", they could give Chinese back A Taste Of Their Own Medicine - eye for an eye blackmail! And while at it, why stop there? In the USA there are a bunch of Analysts and other Talking Heads (CNBC etc) in the Media, who are Spinning AAPL Down! I'd love Apple, or someone, to investigate if the same people are Talking Out Of 2 Sides Of Their Mouths - telling Public to Sell Apple, while telling their Friends to Buy it, after AAPL is taken down low enough?!  

 

Meanwhile, among China's Biggest Claims To Fame are Population Size, Cheap Labor, Currency Manipulation!!! But India is around the corner, and a lot of people  in India speak English! India is more Democratic! I hope Apple creates a Huge Giant Push in India, so that China has less leverage against Apple!

 

Meanwhile, in the USA, those Analysts and other Talking Heads should be reminded about Patriotism!!! Apple is a US Company, unlike Samsung! So maybe those Talking Heads should consider Patriotism vs Quick Profits!!! Yes, I know such considerations are a Can Of Warms, but… Why would USA based Analysts and other Talking Heads try to take down this Great USA Company called Apple? What are they offering in return - Plastic Imitations by Samsung and others, where those Companies Manufacturing Labor Relations have never been under Magnifying Glass as much as Apple & Foxconn?

 

No, I am not calling for USA Analysts and other Talking Heads to become Nationalists, but their feet have to be held to the fire too, as far as Talking Out Of 2 Sides Of Their Mouths!!!

 

As to Chinese Government, do they really want Apple out of China, and more Local or Samsung etc Inferior Products, while Apple offers the Best? Does China really want Cheaper Junk that would make them less competitive, or do they want the Best On Earth? 

 

Apple is a Platform Company, a Total Solution… Others are imitating that Business Model… So why would China want Cheap Imitation vs The Real Thing? 

 

Yes iCloud is not as good as it's going to be, but still, Apple is a Platform Company, a Total Solution!!! 

 

Until someone offers Everything that Apple DELIVERS already worldwide, but they do it Better, and Cheaper on each count, Apple is ahead!!! 

 

I Like Apple having that 137B on days like these, when there are so many Sharp Knives out there, plus Spin Doctors creating their own Prophecies - Profits by Talking Out Of 2 Sides Of Their Mouths!!! 

 

Meanwhile, Dear Apple - India, India, more India, More Independence from China, or any one Country!!! More USA Manufacturing! Please!!!

And to other Big Companies doing business in China: If China can do this to Apple, they can do it to anyone, and with great ease!

US and Other Governments should to protect their Businesses, doing business in China, again such Shake Downs!


Edited by macologist - 4/1/13 at 1:27pm

 

Go  Apple, AAPL!!!

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Go  Apple, AAPL!!!

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post #24 of 37
Tim is no fool! It really doesn't cost too much for Apple to extend the service, since they make quality products. Secondly, he was quick to reaspond on this! Did you guys wonder why? Maybe this was prerequisite before China Mobile deal!
post #25 of 37
Quote:
Originally Posted by radster360 View Post

Tim is no fool! It really doesn't cost too much for Apple to extend the service, since they make quality products. Secondly, he was quick to reaspond on this! Did you guys wonder why? Maybe this was prerequisite before China Mobile deal!

Good point! Chinese ways are unfathomable!

post #26 of 37
Quote:
Originally Posted by msimpson View Post

Hello Vietnam, Thailand and Cambodia,
Any interest in having electronic assembly plants built in your country? We have cash to spend!

Signed,
Tim Cook

Add in Malaysia as well. I'm sure they'd be happy to have it.

post #27 of 37
Quote:
Originally Posted by macologist View Post

But India is around the corner, and a lot of people  in India speak English! India is more Democratic! I hope Apple creates a Huge Giant Push in India, so that China has less leverage against Apple!

 To have their own stores in India, Apple needs to manufacturer a certain percentage of the goods there (believe it was 30%?) so I would not be surprised for Apple to do this at some point (as they have in Brazil), regardless of the issues in China.

 

Just a quick FYI, not every sentence needs or deserves an exclamation point :)

post #28 of 37
Quote:
Originally Posted by peter236 View Post

As the Chinese consumers shift to Huawei, Lenovo and Samsung smartphones, Apple will lose more market share in the world's largest market.

What are you smoking? Sammy et al can have the razor thin margins cell phone market. Apple will concentrate on the mid to high end market.
post #29 of 37

I'm sure 50% is extreme, but the point is it will almost certainly have a negative impact.  Still time to buy some puts since the coming quarter is going to be below Apple's normal performance and will the products they have lined up really offest that?  The fact they havent raised the dividend yet makes me even more wary about this quarter's numbers.  I used to laugh when people said it would see $350 before $500, but now I'm in agreement.  The numbers are just so huge and the products dont have the lead in quality they used to.

post #30 of 37
I have yet to see any positive news for Apple no matter what it does or doesn't do. It's like Apple is completely removed from the rest of the computer and smartphone industry when it comes to company and product weaknesses. No matter what, it is being continuously reported that Apple will always be affected the worst of any company in the world. I can't imagine why this would be despite the fact that Apple has the most means at hand (cash hoard) to change its fate as long as it decides to make those changes. Why should Apple's hands be tied any more than any other tech company? Comparing Apple to H-P? Apple has far more money at hand than H-P ever had to make any changes necessary.

I would think the Chinese consumer would decide whether they want Apple products or not and unless there are legal sanctions put against Apple products, Apple's earnings should not be affected in such a high degree. I thought there were Chinese smuggling Apple products into the country and that doesn't sound like Apple products are losing favor. I would also think there were be a great loss of assembly jobs in China if Apple products aren't produced in large quantity. I'd think the Chinese government would be hurting itself just as badly. Apple is certainly the largest client in a whole string of component suppliers and they'd be hurt pretty badly, too.
post #31 of 37

I see this more as a prelude of things to come.

 

Huawei wants to dethrone Samsung as the producer of most phones.  They need to dominate the biggest market in the world in order to achieve this.  They are a Chinese company.  The home field advantage in China is 'somewhat' bigger than in the US.

 

Android currently has @90% of the market in China. 

Step 1:  Declare this a threat to national security and that the country is too dependent on foreign goods for their technology roadmap.  This is actually legit IMO.  If Huawei had 90% of the US market share I'd be worried.

 

One proposed law is actually pretty sinister and would affect Apple more than Google.  They want to impose severe penalties to Android phones unless Google makes the code publically available essentially as it is written (instead of when Google officially releases it).  This is (in theory) to reduce the competitive edge that Motorola may get by having access sooner.  Of course in reality it would serve to let Huawei know exactly what Google is building into their new products before they are released.

 

The kicker is the law isn't going to apply only to Google.  You don't write laws like 'This law is going to apply only to IBM:......'  So.......  It's a pretty sneaky attack on Apple.  Is Apple going to release its source code at all, much less 'as they are writing it'?   Not frickin likely.  Welcome to paying penalties.  That should provide a pretty sweet home field advantage for Huawei....

 

I think the Chinese phone market is certainly not going to close to foreign companies, but it is going to be a lot less promising than current market expectations.

post #32 of 37

As an expat living in China, and as an "everything Apple" consumer I can assure you this whole issue is nonsense here and consumers know it, at least the ones that matter - those with money and an education! I have had nothing but excellent service here, both directly with Apple while living in Beijing, and now with authorized service providers while living in another city. Apple even authorized the FREE replacement of the motherboard on my over three year old MacBook Pro! For that alone, I would say they actually provide better support in China! They bend over backwards in helping customers here - even to the point of loading MSFT Windows on their new machines for them at the Apple Genius Bars!!! (Unfortunately, a very common occurrence.)

post #33 of 37
Quote:
Originally Posted by ktappe View Post

If Tim Cook is not working to move Apple manufacturing out of China, he is a fool.

Remember that in addition to its 4 plants in China, Foxconn has 5 plants in Brazil, 3 plants in Europe, 2 in India, 1 in Japan, 1 in Malaysia, and 2 in mexico.  They are also considering more investments in Brazil and America as well.

They are also not based in China. But are headquartered in TuchengNew TaipeiTaiwan. They could move Apples manufacturing to other plants in other countries if necessary, and in fact do manufacture iPhones and iPads in Brazil already.


Edited by Mechanic - 4/1/13 at 6:43pm
post #34 of 37
Quote:
Originally Posted by Mechanic View Post

Remember that in addition to its 4 plants in China, Foxconn has 5 plants in Brazil, 3 plants in Europe, 2 in India, 1 in Japan, 1 in Malaysia, and 2 in mexico.  They are also considering more investments in Brazil and America as well.

They are also not based in China. But are headquartered in TuchengNew TaipeiTaiwan. They could move Apples manufacturing to other plants in other countries if necessary, and in fact do manufacture iPhones and iPads in Brazil already.

 

Thats some great info, thanks.  I would like to see some manufacturing in India if that is what it takes (as per an earlier poster) to get some Apple stores happening over there.  I believe Apple really need to hit India hard this year.

 

Plus, I would be a regular customer to an Apple store in my town, if that EVER happened.. 1hmm.gif

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post #35 of 37
Quote:
Originally Posted by AppleInsider View Post

China's recent state-sponsored, anti-Apple campaign might not just be empty rhetoric: it could, according to one estimate, cost Apple $13 billion in sales in the country.

Absolutely ridiculous.

First, the Chinese people do not follow what the government says. In fact, the response is often "the government wants me not to buy this product, so it must be pretty good. I think I'll buy one".

Second, there's absolutely no way to quantify it.

Third, now that Apple has changed their policies and apologized, the Chinese government is praising them. Why isn't the analyst predicting ADDITIONAL sales of Apple products? Oh, I forgot - only bad news changes Apple projections.
"I'm way over my head when it comes to technical issues like this"
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"I'm way over my head when it comes to technical issues like this"
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post #36 of 37
Quote:
Originally Posted by jragosta View Post


Absolutely ridiculous.

First, the Chinese people do not follow what the government says. In fact, the response is often "the government wants me not to buy this product, so it must be pretty good. I think I'll buy one".

Second, there's absolutely no way to quantify it.

Third, now that Apple has changed their policies and apologized, the Chinese government is praising them. Why isn't the analyst predicting ADDITIONAL sales of Apple products? Oh, I forgot - only bad news changes Apple projections.

Yes, obviously in totalitarian China the people ignore what the govt says.  Good point.

post #37 of 37
Quote:
Originally Posted by tkell31 View Post

Yes, obviously in totalitarian China the people ignore what the govt says.  Good point.

Don't be ridiculous.

Obviously, people have to do many of the things the government dictates. They do not, however, have any great love for the government, nor do they go out of their way to follow the government's wishes in voluntary matters.

Since there's no discussion of the government forbidding the sale of iPhones, your comment is irrelevant.
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