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Apple Growth Slows Due To Lower Product Prices, Lost Market Share In China

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(Photo: Apple.com)
(Photo: Apple.com)

BUSINESS

  • Apple net income and revenue slow to rate of 20% in 3Q, lowest growth in over 2 years
  • Apple sells 26 million iPhones, 17 million iPads from April to June
  • Apple faces tough competition from Samsung's Galaxy S3 and HTC's One X smartphones

Apple’s net income and revenue grew at a rate of around 20% in the third quarter of 2012, marking its lowest growth rate in over two years and underperforming against analyst earning expectations for only the second time in ten years.

In sales volume, with 26 million iPhones and 17 million iPads sold between April to June, Apple did moderately well this past quarter. While iPhone sales were at the low end of the expected range with an increase of 28%, iPad sales surged unexpectedly by 84%.

At the same time, the mean selling prices for iPhones and iPads hit record lows.

CFO Peter Oppenheimer cites the following reasons for the decline: 1) as new Apple products are introduced, older products are sold at much-reduced rates; and 2) once-plentiful sales in the Chinese market have declined, with third quarter sales for all of China, Hong Kong and Taiwan down by a little over $2 billion.

Tim Cook, Apple CEO, says that consumer anticipation for the iPhone 5, due this fall, has also stalled sales.

Future Roadblocks Facing World’s Most Valuable Company

A strong US dollar, and resulting higher prices for globally sold US products, will likely continue to affect international sales. Also hurting sales will be the US’s failed economic recovery and effects of the recession in target markets like Europe.

In addition, Apple faces tough competition from Samsung's Galaxy S3 and HTC's One X smartphones, with both Samsung and HTC reaching new heights in global profit, including the Chinese market.

The rivalry between Samsung and Apple, who is suing Samsung for patent infringement, will play out in court July 30. Regardless of the outcome, Apple will be pressed to develop a new line of innovative products to remain a leader in the technology world.

Cook highlights upcoming Apple system and product upgrades, saying: “We are really looking forward to the amazing new products we have got in the pipeline,” indicating that Apple is up to the challenge.

Key Statistics - Global Smartphone Industry

  • From 2011 to 2015, the Global Smartphone Device market will grow at a 25% CAGR, with the reduction in smartphone prices critical to market growth (source: TechNavio).
  • Over 2011 to 2015, the Global Smartphone Application Processor market will grow at an almost 50% CAGR due in large part to a rising call for smartphones with high functionality (source TechNavio).
  • By 2018, the increased global use of smartphones is expected to push the worldwide market for touch screen modules in mobile devices to over 1 billion units (source: Global Industry Analysts).

By Christelle Agboka for
Christelle Agboka is a freelance journalist based in Kingston, Ontario, who covers business and economy news.

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