Economy of the People's Republic of China

Betting against Apple hasn’t been a successful endeavor of late but all of a sudden, declining holiday iPhone numbers seem to be in vogue.

Tech investment company Pacific Crest has echoed KGI’s prediction that year-on-year iPhone sales are likely to decline following the launch of the iPhone 6S, but says that investors shouldn’t be concerned.

We believe iPhone 6/+ models drove abnormally high share gains and upgrade rates that are likely to moderate somewhat in the 6s cycle, which is likely to drive total iPhone units down year-on-year in the first part of financial year 2016 (Q4 of calendar 2015) …

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From some recent news reports and analyst pronouncements, we could easily get the impression that the relatively weak Chinese economy poses a major threat to Apple. The argument doing the rounds is that China is where Apple is seeing most of its growth at present, and the Chinese economy is tanking.

It’s absolutely the case that the importance of China to Apple cannot be overstated. Apple does continue to grow its sales in both the Americas and Europe, of course, and there is no suggestion that this is showing any sign of slowing, despite a saturated smartphone market. But worldwide growth of 33% was dwarfed by that seen in China, as one recent graph vividly illustrated.

If Chinese demand for Apple products were indeed to weaken significantly, there is no doubt that this would be a major problem for Apple. But it seems to me that the issue is being substantially over-stated … 
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