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Apple's woes go beyond China economy: End of easy money among the culprits

Apple last week cut its quarterly revenue forecast for the first time in almost two decades, blaming weak sales in Asia's largest economy

Nisha Gopalan | Bloomberg 

The Apple logo | Photo: Reuters

A slowing economy and relatively high prices have been highlighted as chief culprits behind the slump in demand for Inc.’s iPhones in There’s a third factor that’s been overlooked: the end of easy money.

last week cut its quarterly revenue forecast for the first time in almost two decades, blaming weak sales in Asia’s largest economy. Cheaper devices from the likes of Huawei Technologies Co. and Xiaomi Corp. helped to erode the iPhone maker’s market share. But slowing consumer loan growth has also hurt appetite for high-priced phones.

Beijing has been cracking down on consumer lenders favored by the country’s more free-spending millennial generation. The peer-to-peer lending industry is shrinking as defaults rise and regulations are tightened. The impact on consumption shouldn’t be underestimated. For example, P2P loans to finance car purchases totaled about 17 billion yuan ($2.5 billion), or 9.4 percent of broader internet lending, as of June last year, according to industry site

The availability of credit has helped some consumers buy more expensive cars — and other high-priced items — than they would otherwise have chosen.

Nasdaq-listed LexinFintech Holdings Ltd. offers iPhones and other consumer products via installment loans through its online e-commerce platform. The company’s rose in the fourth quarter from the third, and for the full year compared with 2017, according to a Lexin spokeswoman.

Take the iPhone XS Max, the top-of-the-range model that retails for 9,599 yuan ($1,400) on Apple’s website. A customer on Lexin’s Fenqile platform can pay 758.25 yuan a month on a 12-month plan, or as little as 376.37 yuan under a 36-month plan. Fenqile’s gross merchandise volume rose 33.8 percent in the third quarter from a year earlier.

The Chinese consumer isn’t dead, but she has become a lot more price-conscious. She’ll still buy Tom Ford lipstick, though may hold off on big-ticket purchases like a handbag unless credit is available. As for iPhones, why splash out on a premium brand when much cheaper devices — with comparable technology quality — abound?

As my colleagues Sarah Halzack and Andrea Felsted noted, Nike Inc. posted a 31 percent increase in quarterly sales for its Greater division last month, and demand in the country for Estee Lauder Cos. makeup continues to boom. On the other hand, Cie Financiere Richemont SA — the seller of luxury products from Cartier jewelry to Alfred Dunhill leather goods — is seeing China sales growth moderate.

When credit is freely on hand, consumers everywhere tend to favor higher-end goods. When money is harder to come by, they become pickier. China has just shown that it’s no exception.

First Published: Mon, January 07 2019. 09:07 IST