Depth report

　　

At the end of 2018, there was a joke with pictures on the social network-Huawei's logo was the cut Apple.

    At that time, Huawei's 5G business was violently rejected in the U.S. market, and the wildly circulated jokes claimed that it is no wonder that the Americans were in a hurry.

    In recent years, Huawei mobile phones have indeed regarded Apple as their number one competitor. In the Chinese market, Huawei has secured its position as the mobile phone leader. Globally, Huawei shipped more than 200 million units in the first three quarters of 2018, surpassing Apple and ranking second only after Samsung.

    The impact of Huawei and other competitors on Apple is significant, but it is obviously an exaggeration to say that Huawei cut Apple. After a golden decade, the main force that pulled Apple off the altar was Apple itself.

Emerging markets

    At the beginning of 2019, Apple had a thunderstorm.

    On January 3, Apple CEO Cook issued a "Letter to Investors", stating that the revenue forecast for the first quarter of fiscal year 2019 was lowered to US$84 billion from the previously estimated US$89-93 billion.

    In explaining this action, Cook said that the performance deceleration in the Chinese market exceeded previous expectations. "In the Greater China region, most of our revenue is not enough to meet our guidance targets. More than 100% of the global revenue decline occurred year-on-year in iPhone, Mac and iPad sales in the Greater China region."

    In the following week, China's mainstream e-commerce platforms such as JD.com, Suning.com, Tmall, and Pinduoduo all launched price cuts, mainly for iPhone 8 and iPhone XR. The lowest price of the former was less than RMB 4,000, and the lowest price of the latter fell below RMB 5,000. These channel dealers responded to the media that the price cut was not a promotion, but an official price cut from Apple.

    This is after losing the position of "Apple's second largest market" in 2016, the Chinese market once again "embarrassed" Cook.

    Compared with his predecessor, Cook has always been known for his emphasis on the Chinese market. Jobs had never visited China during his lifetime, but Cook had visited China more than ten times during his 7 years in office, opened Sina Weibo, and was interviewed by Chinese media for the first time. In 2013, when the iPhone 5s and 5c were released, Apple included mainland China on the list for the first time. In the following two years, Apple's sales in Greater China have been rising, and reached the highest point of 58.7 billion US dollars in 2015, accounting for 25.1% of total revenue. The Chinese market surpassed Europe for the first time, becoming Apple's second largest market after the United States.

    It's a pity that the good times don't last long. Only one year later, Apple’s revenue in Greater China began to continue to decline. From the first fiscal quarter of fiscal 2016 to the third fiscal quarter of fiscal 2017 (the natural year from April to June 2017), there was a “six consecutive decline” year-on-year. , To hand over the position of the "second largest market" back to the European market.

    In July 2017, Cook will be responsible for Apple's wireless technology software engineering team leader Ge Yue (Isabel Ge Mahe), transferred to Apple's vice president and managing director of Greater China.

    It is worth noting that Ge Yue is not only the only Asian in Apple's global management, but before that, Apple did not have the position of "Managing Director of Greater China". At the age of 43, Ge Yue was born in Shenyang, Liaoning. She majored in electronic engineering and obtained degrees from Simon Fraser University in Canada and Berkeley in California. Before taking office, she was responsible for Apple's Wifi, Bluetooth and Apple Pay.

    So far, Ge Yue has not accepted any media interviews. However, in the description of his subordinates, Ge Yue is an engineer with "no airiness" and "rigorous and simple". This executive, known as the “head of Apple in China,” opened Weibo as soon as he was transferred to Shanghai. He would publish some Apple information every few days and share his personal life such as travel and family.

    At the end of last year, "Fortune" magazine selected the 25 most influential business women in China in 2018. Ge Yue was on the list. At the same time, Gree Dong Mingzhu and Mobike Hu Weiwei were also on the list. In 2018, at several major public events held in China, including the Boao Forum for Asia and the China International Big Data Industry Expo, Ge Yue attended and delivered a speech.

    Under the promotion of Ge Yue, the strategy and products of Apple headquarters began to "localize, including QR code support, SMS fraud prevention, mobile phone number registration Apple ID, bus card implantation Apple Pay and other functions have been implemented. In 2018, Apple even The official WeChat public account "Apple" was also opened.

    If you look at revenue alone, Ge Yue's report card can be considered good. Since taking office, Apple's revenue in Greater China has indeed rebounded, and the quarter-on-year growth rate has returned to 10%.

    Of course, it is difficult to say where this increase should be attributed. According to the calculation data of the Wall Street Institute of Knowledge and Knowledge, in the 2018 fiscal year when the iPhone X was mainly sold, "price increase contributed up to 97.5% of revenue growth." In fact, the year-on-year increase in revenue in the Greater China region in fiscal year 2018 did not match the total increase in Apple’s revenue. In this year, the Greater China region failed to recover in terms of revenue, revenue share, or gross profit margin. 2015 level.

    According to IDC quarterly monitoring data, starting from the second quarter of 2017, Apple's shipments in China fell to the fifth place. In 2018, Apple’s shipments declined further. As of the third quarter, Apple’s market share in China had fallen from 14.6% at its peak in 2015 to 7.4%, almost halved. The ones ahead of Apple are Huawei, OPPO, vivo and Xiaomi.

    These Chinese smartphone brands equipped with Android systems are selling their respective brands of "high-end flagship phones" at prices ranging from RMB 2,000 to RMB 6,000, equipped with processors, screens, and cameras that are similar to, or even better than, Apple. The lens and battery, with more eye-catching features-such as super night view, high-speed charging, or full screen, impact Apple's market.

    In the second half of 2018, when the iPhone XR appeared in front of consumers with a cheap positioning and a price of 6,499 yuan, Huawei's annual flagship machine Mate 20 Pro was positioned as a high-end business machine, with a price of 5999 yuan (fingerprint version). The two machines are defined by consumers as "competitors." There are nearly 1,000 answers to the question about how to choose between the two machines. One of them said: "I noticed that all the answers that support iPhone XR are just Emphasizing that its shortcomings can be tolerated, and those who support Huawei Mate 20Pro are talking about how many innovations there are.” In the following months, iPhone XR has been cut in orders and prices due to poor sales. So far, Huawei Mate 20pro still It belongs to panic buying and out of stock status.

    In 2018, Huawei's consumer business revenue increased by nearly 50% year-on-year to more than US$50 billion. Although there is still a big gap with the iPhone's total revenue, its sales have gradually equalized or even surpassed.

    The price and performance of Chinese mobile phones are stirring the entire smartphone market. Globally, from 2012 to 2017, the shipment volume of Huawei, OPPO, vivo and Xiaomi increased by 2 times, 20 times, 17 times and 8 times. During the same period, Apple rose only 0.6 times, and Samsung fell 12%.

    Overall, the average selling price of these Chinese mobile phone brands is less than one-third of Apple's, and their impact on the smartphone industry is no longer limited to China.

    In Nehru Square in Delhi, India, Apple’s authorized agent eWorld’s store has bright but clean windows, while the next-door mobile phone store selling OPPO and vivo is booming. According to multiple reports, in the second and third quarters of 2018, the top four mobile phone brands in the Indian market were Xiaomi, Samsung, vivo and OPPO, and Apple's market share was less than 1%.

    Even in the Indian high-end machine market of more than 30,000 rupees (equivalent to RMB 2,900), since the first quarter of 2018, Apple has fallen to third place, with the top two being Samsung and the Chinese brand OnePlus. "Dismal" is not enough to describe Apple's performance in the Indian market in 2018. In the previous year, iPhone shipments in this region had just climbed to 3.2 million units. In 2018, it dropped to 1.7 million units, and sales fell back to the level of three years ago.

Services and hardware "complement each other"

    Since the decline in iPhone sales, among the countless voices of Apple’s negative outlook, the few analysts who insist on bullish Apple’s prospects are surprisingly consistent with Cook’s view: Apple is transforming into an Internet service company, which will bring Apple more than a hardware company. Prospects.

    On August 2, 2018, Apple's market value exceeded $1 trillion. Soon after, JPMorgan Chase gave Apple an “overweight” rating. JPMorgan Chase analyst Shamik Chatterjee wrote in the report that Apple’s transformation into a service company was “faster than investors expected, which promoted This has contributed to the company’s financial and valuation increases.” As of January 2019, JPMorgan Chase maintained this rating.

    Dan Ives, an analyst at US investment bank Wedbush Securities, even said that in the next year, the annual revenue of Apple's service business will reach 50 billion U.S. dollars, because service is the key to Apple's future growth, so Apple's prospects will be 1.5 trillion U.S. dollars. ; In his report at the end of October 2018, he gave Apple a target stock price of $310, which was 40% higher than Apple's closing price on that day.

    As of January 19, 2019, Apple’s market value has shrunk by half compared to Ives’ estimate, falling to $740 billion, but his and other analysts’ views are not unreasonable. Multi-party data shows that Internet services are higher than the consumer electronics industry, which is dominated by smartphones, in terms of growth prospects, profit margins, or price-earnings ratios.

    It is an indisputable fact that the smartphone market is saturated. According to reports from IDC and other institutions, mobile phone shipments have continued to decline in the past one or two years. Although the popularity of 5G may usher in another wave of replacement and growth opportunities, the sustainability is not yet known.

    In contrast, according to iResearch, from 2015 to 2017, the global Internet service market grew from US$10106 billion to US$1,540.9 billion, with a compound annual growth rate of 23.5%. In the service segment, the compound annual growth rate of the app store in the same period reached 38.6%, ranking first among all categories. This is also the category with the highest proportion of Apple's services.

    The calculation of the service business in the report of Jianzhi Institute shows that since 2013, Apple's service profit margin has been rising steadily, surpassing the iPhone in 2014. In fiscal year 2018, the gross profit margin of the service business was 58.6%, at 21.8 billion U.S. dollars, more than one-third of iPhone gross profit. Apple is the first company with a market capitalization of more than one trillion among the four major technology giants of FAAG (Facebook, Apple, Amazon, Google), but this is mainly due to Apple's net profit of nearly 60 billion U.S. dollars. Looking at the P/E ratio alone, the valuation of Internet service companies is much higher. Apple's P/E ratio at the end of 2018 was 14.29 times. In the same period, the multiples of Facebook and Google's parent company Alhabet both exceeded 20, and Amazon was even more than 30 times higher.

    In the context of limited growth prospects in the hardware market, it is not only Apple that regards Internet services as the engine of future growth. In May 2018, in the prospectus submitted by Xiaomi, CEO Lei Jun wrote, "Xiaomi is not a pure hardware company, but an innovation-driven Internet company." Although the contribution of Internet services to Xiaomi's revenue is less than 10%, Xiaomi still places its hopes on future revenue and profit growth on online advertising, mobile games, finance, and entertainment services.