Apple iPhone China Sales Could Drop 50% Over Trade War, Analysts Say

Self-proclaimed “tariff man,” president Donald Trump is about to take a humungous bite out of Apple’s future revenues and profits as his trade war threatens to cut Apple iPhone sales by 50% in China.

Citigroup Inc. on Tuesday drastically slashed its forecast for Apple’s 2019 earnings, projecting that Trump’s trade war against China -- Apple’s largest overseas market -- will hurt iPhone sales in the second half of this year.

“The US/China trade situation will result in a slowdown of Apple iPhone demand in China as China residents shift their purchasing preference to China national brands,” said Citi.

“China represents 18% of Apple sales which we believe could be cut in half,” said Citi.

Citi also said Chinese consumers see the iPhone as less and less desirable as a brand image. Apple is still seen as a very expensive purchase, especially when compared to much cheaper Chinese brands like Huawei.

Citi analyst Jim Suva slashed his unit shipment estimate for iPhones in China to 16.8 million from 33 million, a huge 50% drop. He also lowered his sales and earnings projections below consensus forecasts, and sees a sharp slowdown in Apple demand in China as a result of the trade war.

Citi also significantly cut its price target for Apple to $205 a share from $220 a share. Apple’s stock fell 0.4% in Monday trading to close at $178.23 a share.

China is Apple's third-largest market, generating $52 billion in sales in Apple’s most recent fiscal year. Most of this revenue was derived from iPhone sales.

In the second quarter of fiscal year 2019, Apple said 53.5% of its revenue came from iPhone sales. The iPhone’s share of Apple’s total revenue soared to 59% in Q4 2018 from 25% in Q1 2009.

iPhone sales have consistently risen annually since the iPhone's introduction in 2007. The iPhone sold 40 million units in 2010 and 218 million in 2018.

Apple said iPhone sales worldwide generated more than $167 billion in revenues in 2018. The iPhone is the most successful Apple product to date and one Apple has no replacement for.