ETW 04: Apple Sales Drop as AmCham Reports Increased Optimism
Covering Chinese chatters (discourses, narratives, policies and rhetoric) on external events and actors, military and security issues, and India.
Econ Weekly #1: Key Findings of the Latest AmCham Survey
By Amit Kumar
AmCham China came out with its latest Business Climate Survey for 2024. The survey suggests an improved sense of optimism among the US businesses operating in China. The key findings of the survey are listed below:
2023 Financial Performance: American companies in China report improved financial performance for 2023 with increased profitability and EBIT margins. Despite this, slightly less than half of respondents expected to be profitable.
Optimism Recovers: The two-year business outlook for China has improved, with members showing increased optimism across the board, but especially with regards to domestic market growth, estimated profitability, and the economy.
Intent to Invest: China’s attractiveness as an investment destination has rebounded after last year’s sharp dip, with 50% of respondent companies now considering China among their top three global priorities, a 5pp increase year-on-year.
US-China Relations: Nearly all respondents view US-China relations as crucial to their businesses. Around 30% expect US-China relations to improve in 2024, a notably higher level of optimism than in 2023.
Unequal Treatment: Although it varies by sector, overall, one-third of companies report being treated less favorably by the Chinese authorities than their local competitors. Meanwhile, despite significant improvement compared to last year, a majority (57%) of companies lack confidence that China will further open its markets to foreign firms.
Business Challenges Continue: The primary concerns of American companies continue to be US-China relations, China’s regulatory environment, and rising costs as well as China’s Cybersecurity Law and protecting intellectual property.
Talent Retention: Expatriates have become somewhat more willing to relocate to China over the last year, though US-China tensions and other factors still negatively affect foreign talent recruitment.
The survey also has some interesting charts that are note-worthy. All are sourced from: AmCham Business Climate Survey 2024
Tech Weekly: Apple Sales in China Dropped by 13% in December
By Amit Kumar
Apple’s financial results for the quarter ending in December 2023 have reported a decline in China sales by almost 13%. Its net sales in China dropped from $23,905 million in the quarter ending in Dec 2022 to $20,819 million this year, a 12.9% y-o-y decline. In contrast, Apple saw its sales increase in other regions/markets - Americas, Europe, Japan and Rest of Asia-Pacific.
The SCMP reports that “Apple’s disappointing December quarter in China shows increased competition from domestic smartphone vendors, especially Huawei Technologies.” However, “despite slow iPhone sales, Apple still topped China’s smartphone market in the fourth quarter and the whole of last year, according to a report by tech research firm IDC,” reported the Post.
India on the other hand has continued to be lucrative for Apple lately. Times of India reports “India continues to be a bright spot for Apple registering record with a strong double-digit growth.” Apple CEO Tim Cook was quoted as saying, “India grew- in revenue terms - strong double-digit in the Dec quarter and hit a quarter revenue record.”
Counterpoint Research reported that Apple “surpassed the 10-million-unit mark in shipments and captured the top position in revenue in a calendar year for the first time” in India. Consequently, Apple has pipped Samsung to gain the top spot in India by revenue with just a third of Samsung’s total shipments in 2023. Livemint reports that Apple’s shipments grew over 50% last year. Apple’s market share in the smartphone segment has jumped from 0.8% in 2019 to 6.1% in the first half of 2023.
Comment: India still accounts for a fraction of Apple’s China market. While its revenue last year almost touched $10 billion, the same from China accounted for more than $72 billion. Nevertheless, Apple’s increasing market share in India is good news. The smartphone giant has already opened two new stores last year and expanded its production facility in India. A strong growth in India coupled with dropping sales in China will certainly influence Apple’s future investment and expansion plans in India. This will also allow India to develop backward supply linkages in the medium to long term.
To fully realise the gains of this potential shift, India’s import policy needs to be aligned to support the businesses making a transition. And in this regard, the Indian government’s recent decision to slash import duty on mobile phone spare parts from 15% to 10% is a welcome move. Hope is that duties will be further slashed and such measures be extended to other inputs being imported in various other manufacturing sectors.
Econ Weekly #2: Local governments Lower their Growth Projection for 2024
By Amit Kumar
According to Caixin, “more than half of China’s 31 provincial-level governments have set lower GDP growth targets for 2024 than for last year, although many are aiming for higher rates of expansion than they achieved in 2023,” reported Nikkei Asia.
The Nikkei Asia report, that borrowed the story from Caixin further states:
The goals, which range from around 4.5% in Tianjin municipality to as high as around 8% in Hainan province and the Tibet autonomous region, were unveiled by local governments during their annual legislative meetings that stated in January, where they also reported their economic performance for 2023.
The Nikkei report continues:
The weighted average GDP growth target of the 28 provincial-level governments that had announced 2024 goals by Jan. 28 is 5.5%, basically unchanged from 2023, according to the calculations of analysts at some securities firms. Historically, the national GDP growth target has generally been about 0.5 of a percentage point lower than the local average, which suggests the central government may set a GDP expansion goal for 2024 at 5%, Zheng Jianxin, an analyst at ITG Futures, wrote in a report on Sunday.
The target will be officially announced by Premier Li Qiang at the opening of the annual meeting of the National People's Congress, China's top legislature, in Beijing on March 5.
Latest from the Indo-Pacific Studies Team:
Anushka Saxena, a Research Analyst with IPSP at Takshashila, writes for The Diplomat on why ‘India Has Good Reason to Be Concerned About China’s Maritime Research Vessels’.
In this piece, she argues that since 2019, the activities of Chinese research vessels have overshadowed the maritime survey work being conducted by any other country’s vessels in the expansive Indian Ocean Region. Hence, from a military strategic perspective, an understanding of their operational procedures and potential dual-use applications is critical to India’s maritime security interests. It is also significant for India to make active efforts at its end to curtail the docking of such vessels in surrounding waters. More Below!
In this Compendium of Working Papers from an Internal Conference conducted by Takshashila in January 2024, Amit Kumar and Anushka Saxena, Research Analysts with IPSP, discuss the global policy landscape of ‘Critical Technologies’, including case studies of China’s industrial policy ecosystem and its dominance in Solar PV Supply Chains.