Tuesday, July 23, 2019
Martin Hennecke

Pricey apple takes bite out of innovation
Although I am not a fan of Apple, I can see that the latest iPhone launch event in Cupertino was not as exciting as in previous years. On the same day, Apple-related stocks Sunny Optical Technology (2382), AAC Technologies (2018), and Q Technology (1478) rebounded after declining in the days before the Wednesday launch. But it seems that the surge in these share prices was not because of the launch of the new iPhones - rather, it was mainly due to expectations of a resumption in trade negotiations between China and United States. In the past, Apple took pride in showcasing new innovations at each of its iPhone launch events. For example, a video recording function was highlighted in 2009, the virtual assistant Siri was introduced in 2011, fingerprint recognition feature made its debut in 2013, and 3D touch in 2015. However, Apple's appetite for innovation has weakened, as seen from the recent launch. The new top-of-the-line iPhone is pricier than before and this may not lure more buyers, though it may boost the company's bottom line. The launch also revealed that all the three iPhone models to be released in China will support dual sim card function to attract Chinese customers, but apart from that, there are no other innovative features. Moreover, the models after iPhone 9 have been numbered in Roman numerals - using X instead of 10 - which the Chinese market is not familiar with. The latest models are named the iPhone XS, iPhone XS Max, and iPhone XR, but many Chinese customers may not be able to distinguish between these different models. After every Apple launch, there are a few things that we have to look at: firstly, the share price, secondly, Apple's sales performance, and thirdly, the market response to the new phones. Apple's share remains stable for the moment, while its sales performance and market response have yet to be gauged. Many investors were worried that Apple's performance will be affected by the trade war, as Donald Trump has asked the technology giant to relocate its factories in China back to the United States. Apple's share price had plunged following Trump's comments. Nevertheless, it appears that the impact of the trade war on Apple will be minimal. Also, Beijing has not singled out Apple from the Chinese market for sanctions. So, in the short term, there is not much concern over Apple, if China and US were to resume negotiations. The stocks of smartphone component suppliers such as Sunny Optical Technology and Q Tech may follow the bearish market even if their orders have increased, as this doesn't mean that gross profit margins have risen. It would appear that Apple's latest business strategy is to move away from innovation and towards the advantage of higher prices, which may not benefit these manufacturers. Thus, smartphone component suppliers' stocks will suffer if Apple does badly but even if Apple shines it doesn't mean they will glow as well. Ivan Tong is Editor in Chief of The Standard.
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