Apple ( AAPL ) is in the midst of what you might generously call a “tough” period. The company is dealing with a high-profile antitrust battle with the Justice Department, declining iPhone sales in China and a regulatory investigation in the European Union. And those are just the headlines from the past week.
The company also still faces a shortage when it comes to generative AI capabilities. And while it’s widely expected to debut some sort of generative AI offering at the WWDC developers event on June 10, it’ll need to have quite an impressive showing if it wants to overtake its Big Tech rivals, including Microsoft ( MSFT ) and Google . (GOOG, GOOGL).
All of that is hurting Apple’s stock price. Shares of the iPhone maker are down more than 7% since the start of the year and are up just 6.25% over the past twelve months. Microsoft shares, meanwhile, are up 14% this year and 49% in the past twelve months. Googling? The search giant’s shares are up 9% this year and 43% in the past twelve months.
Suffice to say, Apple’s 2024 is not going well.
Apple’s China problem
Apple’s latest headache came Tuesday, when Bloomberg, citing Chinese government data, reported that iPhone shipments fell 33% year over year in the country in February.
China is Apple’s third largest market, after North America and Europe. In 2023, the region accounted for $72.6 billion of Apple’s total revenue of $383.3 billion. That’s about 19% of the company’s revenue.
And this doesn’t exactly come out of the blue. Earlier this month, Counterpoint Research reported that iPhone sales in the country fell 24% year-on-year in the first six weeks of 2024. Total smartphone sales in China fell 7% over the same period.
Apple has been aggressively expanding in China for years, but a resurgent Huawei and the country’s tough economic conditions are putting pressure on device sales. However, the company is not just sitting still. Last week, CEO Tim Cook flew to China for the opening of the company’s newest flagship store in Shanghai. He also attended the China Development Forum in Beijing and was scheduled to meet with Chinese President Xi Jinping.
According to the South China Morning Post, Apple Authorized Retailers are also trying to boost sales by lowering the price of the company’s latest iPhones in the hope that this will encourage consumers to start buying again. However, it may take more than just lower prices to make that happen.
A battle with the DOJ
In addition to Apple’s Chinese sales drama, the company is also facing its long-awaited antitrust battle with the Justice Department. The lawsuit, which the DOJ filed last Thursday, accuses Apple of illegally maintaining dominance over the premium smartphone market by pushing aside competing apps and devices.
The Justice Department alleges that Apple places restrictions on app developers, makes it difficult for users to switch to competing platforms, and hinders cloud gaming and so-called super apps that give users access to multiple smaller apps from one larger platform.
However, Apple is fighting back, saying in a statement that the lawsuit “threatens who we are and the principles that differentiate Apple products in fiercely competitive markets.” If successful, it would hinder our ability to create the kind of technology people expect. Apple.”
The DOJ is trying to force Apple to change its business practices, which could mean allowing third-party apps more access to the company’s platforms and requiring Apple to expand compatibility with third-party device makers.
The lawsuit could also prove to be a dangerous distraction for Apple, similar to the way Microsoft’s antitrust battle in the 1990s drew executives’ attention away from emerging technologies like smartphones. If Microsoft hadn’t been so invested in its antitrust fight at the time, chances are the company would have seen the smartphone era coming, just like Apple and Google, and launched its own line of handsets.
European Commission is calling
In addition to slowing iPhone sales in China and the DOJ’s antitrust case, the European Union’s competition watchdog, the European Commission, announced Monday that it is investigating whether Apple is complying with the bloc’s Digital Markets Act.
In a statement released Monday, the Commission said it is investigating Apple’s new app fee structure in the EU and whether Apple meets user choice obligations regarding default apps and the ability to uninstall pre-installed apps.
The Digital Markets Act requires Apple to open the iPhone to third-party app stores, allowing developers to collect roughly the 30% and 15% fees the company charges for sales through its own App Store. While Apple said it will allow these third-party stores, the company said it will also charge developers a Core Technology Fee of 50 cents per installation per year for apps installed more than 1 million times in the past 12 months.
In a statement, the EC said it is investigating whether Apple’s new fees defeat the purpose of the Digital Markets Act obligations.
While Apple is certainly facing a slew of challenges, it’s far from over. It is still the second richest company in the world by market capitalization – after Microsoft – and it will continue to sell millions of subscriptions to devices and services for at least the next year.
Still, Apple could be in for a bumpy ride in the near future.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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