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Apple blames US-China trade war for first drop in revenue in over a decade

Apple reported its Q1 2019 revenue will fall short of previous estimates

Apple building

Apple has lowered its Q1 2019 revenue estimates from $89-93bn to $84bn, breaking its twelve-year winning streak, citing the unforeseen 'magnitude of economic deceleration, particularly in Greater China' as a significant influencing factor.

The revenue target marks the first year-over-year decline since 2016 for the iPhone manufacturer, falling significantly below its Q1 2018 revenue of $88.3bn.

Sales of the iPhone have suffered over the past year, particularly in China, while expected upgrades from older models in some of Apple's more developed markets also fell short of predictions.

Apple is heavily reliant on the success of its flagship mobile product and despite year-over-year growth of nearly 19% for its other devices, including the iPad, Mac and wearables divisions, a disappointing iPhone performance has sent investors reeling.

It wasn't just a high-priced phone and reduced priced battery replacements that stopped consumers from buying Apple's latest line of phones, though. Macroeconomic factors were cited as key contributors with a focus on China's economy.

China's economy slowed in the second half of 2018, as did visits to Apple stores in China, Tim Cook wrote in a letter to investors.

"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China," said Cook. "In fact, most of our revenue shortfall to our guidance, and over 100% of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.

"China's economy began to slow in the second half of 2018. The government-reported GDP growth during the September quarter was the second lowest in the last 25 years," he added.

It's not just the country's economy, the widely reported trade war between China and the US is also believed to have contributed to the lack of iPhone sales.

"We believe the economic environment in China has been further impacted by rising trade tensions with the United States," said Cook. "As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed. And market data has shown that the contraction in Greater China's smartphone market has been particularly sharp.

It has already been reported from intercepted EU cables that China's president Xi Jinping doesn't care "if a trade war hurt everybody", as long as China is seen to not submit to President Trump's bullying of Beijing.

But despite the bitter feud between the two economic powerhouses, Apple believes its business in China "has a bright future".

"The iOS developer community in China is among the most innovative, creative and vibrant in the world, said Cook. "Our products enjoy a strong following among customers, with a very high level of engagement and satisfaction."

Following the announcement, Apple's share price fell by 7.5% in after-hours trading.

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