Apple’s earnings disappoint as it looks to focus on a changing market

January 30, 2019


Apple’s latest quarterly earnings announcement indicates a company, as well as an industry, in transition. Smartphone shipments are in decline and competitors more adept to changing customer wants and desires. Indeed, according to IDC, global industry smartphone shipments declined 6.0% in third quarter, 2018. A number of reasons are behind declining shipments including maturing markets, improved processing power and memory capacity, the ability to download an app if a phone doesn’t have a particular feature, and the lack of innovation that prompted users to trade in a year-old-phone for one that perhaps costs even more. Meanwhile, calls for Apple to shift more manufacturing to the U.S. continues to mount. Its largest supply chain partner, Foxconn, made a flashy announcement in 2017 when it announced plans to build its first U.S. manufacturing facility in Wisconsin. The original intent of the facility was to manufacture advanced large screen displays for TVs and other consumer and professional products. However, the company now plans to shift its focus away from manufacturing at the U.S. facility to one more of a technology hub that would consist of research facilities along with packaging and assembly operations. According to a Foxconn spokesperson, rather than manufacturing LCD panels in the United States, it would be more profitable to make them in greater China and Japan, ship them to Mexico for final assembly, and import the finished product to the United States. Even though Amazon has tried to manufacturing in the U.S., a rather telling New York Times article, “Tiny Screw Shows Why iPhones Won’t Be ‘Assembled in U.S.A.’,” best describes why it will not move significant manufacturing functions from China to the U.S. In China, Apple relies on factories that can produce vast quantities of custom screws on short notice. However, when Apple began making computers in Austin, Texas, it struggled to find enough screws. The screw shortage was one of several problems that postponed sales of the computer for months. By the time the computer was ready for mass production, Apple had ordered screws from China. According to the New York Times article, Apple has found that no country can match China’s combination of scale, skills, infrastructure and cost. While the U.S. may not be a manufacturing focus for Apple, India, may serve them well. In late December, Reuters reported that Foxconn would begin to assemble iPhones in India as early as this year. This shift to India could help both Foxconn and Apple to limit the impact of a trade war between the United States and China. It also could benefit Apple’s revenue growth. In its latest earnings report, the only geographic regions to report positive net revenue were the Americas, up 4.9% and Rest of APAC, up 1.1%. How well Apple responds to changing consumer needs and increasing competitive threats will play a role in how it shifts its supply chain to adapt. Apple is not the only business that is feeling market changes. Other businesses in varying industries are as well, and whoever has the most adaptive and responsive supply chain will come out ahead of the pack.

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Apple’s earnings disappoint as it looks to focus on a changing market

January 30, 2019


Apple’s latest quarterly earnings announcement indicates a company, as well as an industry, in transition. Smartphone shipments are in decline and competitors more adept to changing customer wants and desires. Indeed, according to IDC, global industry smartphone shipments declined 6.0% in third quarter, 2018. A number of reasons are behind declining shipments including maturing markets, improved processing power and memory capacity, the ability to download an app if a phone doesn’t have a particular feature, and the lack of innovation that prompted users to trade in a year-old-phone for one that perhaps costs even more. Meanwhile, calls for Apple to shift more manufacturing to the U.S. continues to mount. Its largest supply chain partner, Foxconn, made a flashy announcement in 2017 when it announced plans to build its first U.S. manufacturing facility in Wisconsin. The original intent of the facility was to manufacture advanced large screen displays for TVs and other consumer and professional products. However, the company now plans to shift its focus away from manufacturing at the U.S. facility to one more of a technology hub that would consist of research facilities along with packaging and assembly operations. According to a Foxconn spokesperson, rather than manufacturing LCD panels in the United States, it would be more profitable to make them in greater China and Japan, ship them to Mexico for final assembly, and import the finished product to the United States. Even though Amazon has tried to manufacturing in the U.S., a rather telling New York Times article, “Tiny Screw Shows Why iPhones Won’t Be ‘Assembled in U.S.A.’,” best describes why it will not move significant manufacturing functions from China to the U.S. In China, Apple relies on factories that can produce vast quantities of custom screws on short notice. However, when Apple began making computers in Austin, Texas, it struggled to find enough screws. The screw shortage was one of several problems that postponed sales of the computer for months. By the time the computer was ready for mass production, Apple had ordered screws from China. According to the New York Times article, Apple has found that no country can match China’s combination of scale, skills, infrastructure and cost. While the U.S. may not be a manufacturing focus for Apple, India, may serve them well. In late December, Reuters reported that Foxconn would begin to assemble iPhones in India as early as this year. This shift to India could help both Foxconn and Apple to limit the impact of a trade war between the United States and China. It also could benefit Apple’s revenue growth. In its latest earnings report, the only geographic regions to report positive net revenue were the Americas, up 4.9% and Rest of APAC, up 1.1%. How well Apple responds to changing consumer needs and increasing competitive threats will play a role in how it shifts its supply chain to adapt. Apple is not the only business that is feeling market changes. Other businesses in varying industries are as well, and whoever has the most adaptive and responsive supply chain will come out ahead of the pack.

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  • Categories