Apple’s most recent financials are revealing; almost as much in what they say, as what they don’t say. Across the board, every major product is down; sales, units, profits. But services, which is something of a catch all for the ecosystem, is up dramatically, which tells us that Apple’s customers are happy and sticking around.
Sales in China took a bigger drop than anywhere else, and while there are calls for Tim Cook’s head on a platter from the legions of nattering nabobs of negativism aghast that Apple could be impacted by worldwide economic issues and market saturation, Apple’s executives do not control the forces of commerce.
In fact, I’m not sure anyone is in charge. And that takes me back to China.
China’s economy is one of the wonders of the world, an almost magical growth that’s been going on for many years; up, up, and up some more. Anybody see something similar between Apple and China? Growth doesn’t go on at the pace it has in China forever; markets expand and contract, ebb and flow, mature and change.
Apple’s growth period, for now, has ended. It looks as if China has similar issues, and that will impact Apple’s fortunes in the fortune cookie country where many fortunes have been won and lost in recent decades. But let us call it what it is. A crash? No. Apple had a ‘horrible’ quarter and managed more than $10-billion in profits on barely $50-billion in revenue. More profit than Microsoft, Google, Facebook, Samsung, and Amazon. Combined.
Likewise, China’s market is huge and growing, but will serve up a hiccup or fur ball from time to time, and that time is now. Get over it. China isn’t going anywhere.
Wait. Didn’t Carl Icahn sell all his Apple stock because China? After all, China is a Communist dictatorship, right? Who know what goes on in a dictatorship, right?
Quick. Who’s running Russia? Elected Dictator Vladimir Putin. Who’s running China? Hmm. China is a bit complicated because, on paper, at least, the country is Communist, but in reality it’s a capitalist society not all that unlike capitalist U.S. of A. Maybe even more so, because China is more of wild west capitalism, and China’s leaders– despite some saber rattling here and there, despite a few threats to outsiders doing business in China– knows which side of its bread is buttered.
Cracks In Cracking Down
Let’s say China’s government decides to crack down on Apple, Samsung, and all the other smartphone makers, electronic component makers, and manufacturers that take advantage of the country’s low wage labor force for profit– and demands encryption keys or backdoors, demands profit sharing to the government, and imposes other economic restrictions.
That’s the cold water effect that would send shock waves across the modern technology world that China cannot be trusted. Such actions would dampen trade immediately, and that would impact China’s economy in a very negative way; layoffs of millions of workers would happen within months as Western businesses cut back on goods from China. Investment would diminish and other countries would retaliate.
Dictators love to dictate but they’re smart enough to know that having millions of people rioting on the streets because government policies have cost them their jobs is not what keeps officials in power.
Apple– and many, many other companies, technology or otherwise– take advantage of China’s natural resources and massive work force, all in the name of profits. Likewise, China’s government manages, as much as it can, the economic growth engine to the benefit of its people and its leaders, and while we see some noise here and there, and the expected ebb and flow of economic forces, why would China’s leaders rock the boat so much that it harms the vessels ability to float?
Both Apple and China have a China problem, but it’s more of a problem with uninformed media and skittish investors than it is with Apple.