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

Posted:
in AAPL Investors edited January 2014
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.
«1

Comments

  • Reply 1 of 36
    e1618978e1618978 Posts: 6,074member
    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.
  • Reply 2 of 36
    tallest skiltallest skil Posts: 43,399member


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

  • Reply 3 of 36
    apple ][apple ][ Posts: 8,435member


    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.

  • Reply 4 of 36
    don108don108 Posts: 79member
    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!"
  • Reply 5 of 36
    e1618978e1618978 Posts: 6,074member

    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.

  • Reply 6 of 36


    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.

  • Reply 7 of 36
    sacto joesacto joe Posts: 713member
    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!
  • Reply 8 of 36
    gatorguygatorguy Posts: 20,291member
    e1618978 wrote: »
    ...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."
  • Reply 9 of 36
    jfc1138jfc1138 Posts: 3,090member


    Cmparing HP to Apple?


     


    Really?

  • Reply 10 of 36
    ktappektappe Posts: 759member
    If Tim Cook is not working to move Apple manufacturing out of China, he is a fool.
  • Reply 11 of 36
    rabbit_coachrabbit_coach Posts: 1,114member

    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.

  • Reply 12 of 36
    bigpicsbigpics Posts: 1,362member

    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...."

  • Reply 13 of 36
    msimpsonmsimpson Posts: 452member
    Hello Vietnam, Thailand and Cambodia,
    Any interest in having electronic assembly plants built in your country? We have cash to spend!

    Signed,
    Tim Cook
  • Reply 14 of 36
    correctionscorrections Posts: 1,277member
    "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.
  • Reply 15 of 36
    jfc1138jfc1138 Posts: 3,090member


    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.

  • Reply 16 of 36
    jfc1138jfc1138 Posts: 3,090member


    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.

  • Reply 17 of 36
    enzosenzos Posts: 344member
    Free publicity for Apple; it'll probably make them a couple of extra billions.
  • Reply 18 of 36
    peter236peter236 Posts: 254member


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

  • Reply 19 of 36
    peter236peter236 Posts: 254member

    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.

  • Reply 20 of 36
    tallest skiltallest skil Posts: 43,399member


    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.

Sign In or Register to comment.