Once dominating the technology world, Apple is now under attack from many sides. Demand from Chinese customers is slowing down, the App Store is facing a wave of criticism from European regulators, and recently its business operations have struggled, causing Apple's valuation to be affected.
After hitting a historic milestone of $3 trillion last year, Apple's capitalization has evaporated by hundreds of billions of dollars in the past few weeks. So what are the challenges that Apple is facing? Let's join CPT in reviewing the major challenges that Apple is facing in the article below.
Pressure from the European Union
The EU's Digital Markets Act (DMA), which took effect last week (March 6), has become the main threat to Apple's ecosystem.
For the first time, users of the American technology giant's devices can download software from outside the App Store. Besides, they can also use other payment systems and more easily choose the default web browser.
However, Apple has long opposed such changes, arguing that they would compromise the user experience and software security.
Mr. Phil Schiller, Director in charge of the App Store, emphasized: "Apple is having to create a technology that allows an application to install other applications and this has potential risks."
Although Apple also agreed to collect lower commissions when customers make purchases on the App Store, it still added a number of other fees that angered software developers. This is also a bigger threat to Apple as this business model that generates tens of billions of dollars in revenue each year may collapse.
Also last week, the EU fined Apple 1.8 billion euros (equivalent to 2 billion USD), related to accusations that the company hindered online music streaming rivals such as Spotify.
The slowdown of the Chinese market
Apple's sales in the Chinese market have shown signs of weakening over the past several months and do not seem to stop yet. According to data from Counterpoint Research, iPhone sales in the country of billions of people have plummeted 24% in the first 6 weeks of 2024.
The Chinese market overall is slowing down, but Apple is sliding faster than local rivals. Making Vivo become the leading phone supplier for people in the country.
In an effort to boost demand, Apple launched rare discounts on its online store in January. Local resellers are also discounting iPhones by up to $180.
Besides, in the context of geopolitical tensions between Washington and Beijing continuing to escalate, Apple's dependence on China as the country is both a consumer market and a production center could become worrying.
Vision Pro glasses are not suitable for general tastes
Apple introduced a new product category earlier this year: mixed reality glasses. Specifically, Vision Pro glasses, launched on February 2, made a strong impression on the public and attracted many new users.
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However, this is still an expensive product with a price of 3,500 USD and does not have many practical applications. Vision Pro is too heavy to wear for long periods of time and many software developers still do not want to build separate applications for these glasses.
CEO Tim Cook's initial goal was to sell a pair of lightweight augmented reality (AR) glasses that users could wear all day. Apple cannot yet produce such a complex device, so it has to accept the introduction of a bulky pair of glasses that combine AR with virtual reality.
Apple's challenge now is to make the Vision Pro lighter and younger, helping to popularize the product among the public, and this process may take many years.
The tablet segment is gloomy
More than a decade after the iPad became an instant craze, many consumers have lost their love for tablets. According to IDC, iPad sales last year fell to their lowest level since 2011. This is not good news when Apple is the dominant tablet seller in the market, accounting for about 40% of the market share.
Some consumers have switched to larger-screen phones or returned to laptops. Apple also did not launch any new iPad models last year.
However, the good news is that Apple is about to launch new iPad models that can create breakthroughs. For the first time, the iPad Air will come in two sizes, and the Pro model will have an OLED display.
Catch up in the AI race
Since OpenAI's ChatGPT made a splash in 2022, tech companies have been racing to add more generative AI features to their products. Apple has been conspicuously absent from this craze, raising concerns that the tech giant is falling behind in a new field rich with potential.
Apple has told investors that it has been bringing AI into its software and services for a long time, but it seems the iPhone maker needs to create more resounding success.
A big bang could come in June when Apple holds its annual software developers conference. At last month's business results announcement, CEO Tim Cook promised to create a breakthrough in AI this year.
However, Apple is also having to play catch-up with competitors like Samsung Electronics. Recently, Samsung launched phones equipped with AI features from Google.
Microsoft, sometimes an ally and sometimes a rival of Apple, has also risen to become the world's most valuable technology company. At the same time, it is also OpenAI's largest sponsor and has introduced a series of new AI features.
In addition to the difficulties that Apple is facing, the company is also facing many different lawsuits such as the US Department of Justice (DoJ) lawsuit on antitrust, and the legal battle with medical device manufacturer Masimo revolves around Apple Watch.
Not to mention that changing senior personnel is a common occurrence at Apple. The iPhone manufacturer has lost some excellent leaders in recent months, especially in the design team, leaving the team once led by the legendary Jony Ive almost gone.
The question many people are wondering right now is whether Apple's current price of 204 USD/share can still stand. Among Wall Street's 26 analysts, there were 9 Holds, 1 Sell and 16 Buys for AAPL stock, representing a change from January's 24 Buys.
