Apple Inc is ready to lend a helping-hand to China, its second largest market, as it undergoes a fierce battle with the worst flood the country has seen in years. According to China Foundation for Poverty Alleviation (CFPA), the tech giant has donated about $1 million (7 million yuan) to a leading Chinese non-governmental organization (NGO).
CFPA said in a statement on its official website: “Apple Inc. has given 7 million yuan donation to the China Foundation for Poverty Alleviation to support China's Yangtze River region suffered flood emergency relief.” The Chinese NGO has also ensured that it will work closely with the iPhone maker to make sure that the money donated is used in the best interest of the flood victims.
Moreover, CFPA also added that Apple is the first US firm this year to make donations for the Chinese flood victims. Tim Cook, Apple’s CEO said on Weibo: “Our thoughts are with all those devastated by the flooding along the Yangtze River.” Weibo is a Chinese social networking website similar to the US based Twitter Inc.
Recently, heavy flooding in China’s Yangtze River and other rivers caused landslides, mudslides, hail and other disasters. According to the statistics released by China’s Ministry of Civil Affairs, the areas effected by floods includes Anhui, Jiangsu, Jiangxi, Hunan, Hubei, Sichuan and other southern areas of the country.
The Ministry said: “11 provinces, 86 cities, 440 counties, 3100.8 million were affected by the heavy flooding.” In addition, it also added, “164 people were killed and 26 others are missing, emergency relocated 199.3 million Chinese residents, 106.4 million people needed emergency life assistance; 73,000 houses collapsed and 398,000 damaged in varying degrees; crops were affected and an area of about 2701.4 thousand hectares, of which 673.6 one thousand hectares of crops were destroyed during the floods. The country suffered a direct economic loss of 67.09 billion yuan.”
Apple has also made other donations to China after such natural disasters including heavy floods. According to the US Chamber of Commerce Foundation, the iPhone maker also donated around $8 million (50 million yuan) for the victims of 2008 Wenchuan Earthquake in the Sichuan region.
Apple’s aid to China came at a hard time for the US based tech giant. The company’s performance in the world’s biggest smartphone market and its second largest market has been declining amid stiff competition and regulatory issues.
Apple’s revenue for the second quarter of fiscal year 2016 dropped about 12.8%. It reported revenue of around $50.56 billion in 2QFY16. Similarly, “Sales to Greater China, which includes Hong Kong and Taiwan, fell 26% to $12.49 billion. In the same quarter a year earlier, Apple’s Greater China sales rose 71%.”
It’s the first time that Apple has suffered such huge decline in quarterly revenue in the mainland territory, which used to contribute more than 50% of the company’s total revenues. Similarly, the company’s net profit also suffered a massive 22.5% decline in 2QFY16. It reported net profit of $10.52 billion.
Recently, Shenzhen Baili, a little known Chinese startup, also won a surprise lawsuit against the tech giant, in which it claimed that the latter has violated a design-related patent Shenzhen Baili claims to own in China. As a result, the Beijing Intellectual Property Office granted Baili a sales sanction against iPhone 6 and iPhone 6 Plus.
The loss also came as a huge surprise for Apple, which was confident that it come out as the victor in the lawsuit. The loss has also opened the doors for the company to face similar lawsuits in the future, as the recent victory of Shenzhen Baili will encourage others to do the same, in case of any discrepancy. In the past, major foreign companies such as Qualcomm, Microsoft and others have faced huge setbacks in the world’s second largest economy amid stringent regulatory policies and unhealthy relations with the Chinese government. Likewise, analysts opine that Apple is expected to face the same treatment in the future.
Apple’s iPhone sales, its flagship product has been facing a downward shift in China. However, competition in the world’s largest smartphone market has toughened up in the recent past, as local Chinese brands have started producing high quality products. For Example, Huawei Technologies, a Chinese start-up, climbed up to become the world’s third largest smartphone maker behind Apple and Samsung. Huawei is also expected to lead the smartphone market this year.
We believe that the recent donations made by the company may ease some of the tensions with the Chinese government and could also act as a catalyst in winning the government’s support in the future. However, Apple’s growth in the country has been flat for the past few years and keeping the regulatory issues aside, the company needs to make some changes to its strategies in the mainland territory.