by Apple (AAPL) is in the middle of what you might call a “difficult” period. The company is battling 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 last week’s headlines.
The company still faces a deficit in AI generation capabilities. And while it’s widely expected to debut some AI-genius offering during its WWDC developer event on June 10, it’s going to need an impressive showing if it’s going to catch up to its Big Tech rivals including Microsoft (MSFT) and Google (GOOG, GOOGL).
All of that is hurting Apple’s stock price. The iPhone maker’s shares are down more than 7% since the start of the year and are only up 6.25% over the past 12 months. Meanwhile, Microsoft shares are up 14% year to date and 49% over the past 12 months. Google? Major search shares have increased by 9% in the year to date and 43% in the last 12 months.
Suffice it to say, 2024 is not going well for Apple.
China’s Apple problem
Apple’s latest headache came on Tuesday, when Bloomberg reported, citing Chinese government data, that iPhone shipments fell 33% year-over-year in the country in February.
China is Apple’s third largest market behind North America and Europe. In 2023, the region accounted for $72.6 billion of Apple’s $383.3 billion in total revenue. That’s about 19% of the company’s sales.
And this is not exactly out of the blue. Earlier this month, Counterpoint Research reported that iPhone sales fell 24% year-on-year through the first six weeks of 2024 in the country. Total smartphone unit sales in China declined by 7% during the same period.
Apple has been expanding strongly in China for years, but emerging Huawei and difficult economic conditions in the country are pushing device sales. The company isn’t just sitting idly by, though. Last week, CEO Tim Cook flew to China to open the company’s latest flagship store in Shanghai. He also attended the China Development Forum in Beijing and was expected to meet Chinese President Xi Jinping.
According to the South China Morning Post, Apple’s authorized retailers are also trying to goose sales, cutting the price of the company’s latest iPhones in the hope that it will get consumers to start buying again. However, doing so may take more than lower prices.
Battle with the DOJ
Outside of Apple’s China sales drama, the company is facing its long-awaited antitrust fight with the Justice Department. The lawsuit, filed by the DOJ last Thursday, accuses Apple of illegally dominating the premium smartphone market by excluding competing apps and devices.
The Justice Department demands that Apple impose restrictions on app developers, make it difficult for users to switch to competing platforms, and block cloud gaming and so-called super apps that allow users to access numerous smaller apps from one larger platform.
Apple, however, is fighting back, saying in a statement that the suit “threatens who we are and the principles that set Apple products apart in fiercely competitive markets. If successful, it would hinder our ability to develop the kind of technology what people expect Apple to create.”
The DOJ is trying to force Apple to change its business practices, which could give third-party apps greater access to the company’s platforms and require Apple to expand compatibility with third-party device makers.
Creating the lawsuit could also be a dangerous distraction for Apple similar to how Microsoft’s intrust battle in the 90s stole executives’ attention away from emerging technologies such as smartphones. If Microsoft hadn’t invested so much in its fight against antitrust at the time, there’s a good chance it would have seen the age of the smartphone arrive like Apple and Google did, and would have launched its own line of handsets.
The European Commission is calling
In addition to slowing iPhone sales in China and the DOJ’s antitrust suit, the European Union’s competition watchdog, the European Commission, announced on Monday that it is looking into whether Apple is complying with the bloc’s Digital Markets Act.
In a statement released on Monday, the Commission said it is investigating Apple’s new app fee structure in the EU as well as whether it meets user choice obligations related to default apps and the ability to delete pre-installed apps.
The Digital Markets Act requires Apple to open up the iPhone to third-party app stores, enabling developers to receive roughly the 30% and 15% fees the company charges for sales through its own App Store. While Apple said it will allow those third-party stores, the company said it will also charge developers a Core Technology Fee of 50 euros per install per year for apps that have been installed more than 1 million times in the past 12 months .
In a statement, the EC said it is looking into whether Apple’s new fees violate the purpose of the Digital Markets Act obligations.
While Apple is certainly facing a slew of challenges, it is far from down and out. It remains the second richest company in the world by market capitalization – behind Microsoft – and will surely continue to sell millions of subscription devices and services over the coming year.
Still, for the foreseeable future, Apple could be in for a bumpy ride.
Email Daniel Howley at dowley@yahoofinance.com. Follow him on Twitter at @Daniel Howley.
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