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Journalism of Courage
As the year comes to an end, Apple is facing one of the biggest setbacks in years – a ban on the latest Apple Watches in the company’s home turf. It was an unprecedented move when a company as big as Apple had to temporarily halt sales of its latest Apple Watches due to a patent dispute. Surely, that’ll only be a tiny blip on their radar? Not quite. This bit of bad news is actually part of a larger trend of misfortunes for Apple in 2023. From revenue decline to regulatory pressure, we take a look back at how the past year has proven to be a not-so-good year for Apple.
Apple has experienced a catastrophic 2023 in China – a massive blow considering the country accounts for nearly 20% of the tech giant’s revenue, second only to the US. After enjoying market dominance for years, Apple has faced intense competition from homegrown phone makers like Xiaomi and Oppo. But the biggest threat has come from the resurgence of Huawei, despite US sanctions. In fact, Huawei overtook Apple’s iPhone for the no.1 spot in smartphone market share this year, according to the research firm Canalys. Industry experts predict that the iPhone will fall behind Huawei in 2024, which is an alarming trend given that the iPhone 15 brought major upgrades.
But Apple’s China woes extend far beyond slipping market share. Rising US-China tensions have put Apple in the crosshairs of the Chinese government. Beijing expanded its ban on iPhones for state agencies and state-owned companies, according to Bloomberg, crushing Apple’s stock price by nearly 7 per cent in just two days and evaporating $194 billion in market value.
Meanwhile, Chinese regulators launched an investigation into Apple supplier Foxconn over taxes and land use, further complicating operations. Analysts have long warned Apple’s heavy China reliance makes it vulnerable. In response, Apple is aggressively expanding manufacturing in India and diversifying its supply chain.
Apple’s fourth fiscal quarter, which ended on September 30, witnessed the company’s sales decline for the fourth straight quarter. This marked the longest slowdown for the tech giant since 2001. The primary causes for the decline were slow Mac demand and a somewhat unstable smartphone market in China despite the launching of updated Macs and iPhones this year. Experts were unanimous that revenue could have been stronger if Apple had released new iPad models or more innovative accessories. But the company chose to make no significant updates to either product category.
EU regulators have been ramping up efforts to rein in Apple’s dominance, drafting legislation to curb anti-competitive practices and impose oversight on AI systems. Last month, Apple reluctantly agreed to make changes to App Store policies to comply with the EU’s Digital Markets Act (DMA), which came into force in May. Policy revisions are imminent, including reduced App Store fees for European developers.
More recently, Apple proposed granting access to its proprietary tap-and-go mobile payments technology to rivals, according to Reuters. This concession could resolve EU antitrust charges and help Apple avoid substantial fines. Last year, the EU accused Apple of blocking access to its tap-and-go NFC technology, hampering the development of competing mobile wallets on Apple devices.
With the EU cracking down, Apple is expected to give in and allow more competition next year. The company was already forced to ditch its proprietary Lightning port and now it may be forced by regulators to lower some more walls.
The holiday season has come and gone, and Apple fans were left disappointed by the lack of a new iPad model this year. For the first time in over a decade, Apple did not release an updated version of its popular tablet. This comes during a concerning decline for iPad sales and revenue.
In the most recent quarter alone, Apple’s iPad revenue dropped to $6.4 billion, down significantly from $7.1 billion in the same quarter last year. For the full year, iPad revenue was $28.3 billion, compared to $29.3 billion in 2022. The downward trend in sales should have prompted Apple to energise the product line with exciting new models. Yet according to Mark Gurman, the company simply couldn’t get both revamped AirPods and iPads ready on time. iPad fans will apparently have to wait until 2024 for a comprehensive revamp of the tablet family.
While Apple touted USB-C as a major upgrade during its glitzy iPhone 15 series launch event, the move was largely driven by an EU mandate requiring all mobile devices to adopt the standard by 2024. Behind the scenes, this shift threatens a revenue stream for Apple – licensing fees from third-party Lightning accessory makers, which have proliferated over the past decade. By switching to the more universal USB-C standard, Apple also risks customers being more inclined to buy Android devices in the future, now that accessories will work across platforms.
At the same time, Apple faces some pressure in India as well where regulators are urging the company to equip even older iPhone models with USB-C ports. Apple is resisting this proposal, arguing it could jeopardise local production targets tied to India’s production-linked incentive (PLI) scheme.
Amid other problems, something fully beyond Apple’s control loomed – economic woes. While avoiding mass layoffs so far, Apple made a dramatic move by slashing Tim Cook’s 2023 pay by 40% at the start of the year, bringing his total compensation down to $49 million, per an SEC filing. The reduction was at Cook’s own request after a shareholder vote over his pay package. Apple also scaled back the number of restricted stock units Cook would receive upon retirement before 2026.
The final straw in Apple’s annus horribilis was an unexpected Apple Watch ban in the US. A patent case led to the US International Trade Commission hitting Apple with an import ban for infringing medical device maker Masimo’s pulse oximetry patents. Consequently, Apple froze sales of the affected models – Series 9 and Ultra 2 – online on December 21 and yanked models from stores on December 24.
Apple does not report Watch revenues specifically, but its critical wearables business generated $39.8 billion in fiscal 2023 revenue, with the US being the largest market. Therefore it comes as zero surprise that Apple is scrambling to find ways to work around the ban, like disabling the SpO2 sensor, but this may not be enough. Experts agree it could be a prolonged process before the ban is resolved, delivering another blow when Apple is already reeling.
