On 9 June, at Apple Inc.’s Worldwide Developers Conference (WWDC), chief executive Tim Cook and his top brass unveiled a slew of updates, including a new ‘liquid glass’ design and enhancements to Apple Intelligence. But analysts, developers and investors were left underwhelmed. The announcements felt incremental, many of the features already exist in rival products.
Some had hoped Apple would use the event to mount a dramatic AI comeback. That didn’t happen. Its shares slipped about 1.5% on the Nasdaq post-keynote.
Apple’s troubles didn’t begin with WWDC. The event merely spotlighted its deeper struggle to keep pace with competitors. Its share price has dropped nearly 20% so far this year, the steepest decline among the five big tech firms, including Meta, Microsoft, Amazon and Google.
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That drop reflects a mix of investor concerns: sluggish iPhone sales; declining market share in China, one of its biggest markets; rising regulatory scrutiny of its high-margin services business; its faltering AI ambitions; and renewed criticism from US president Donald Trump over its global outsourcing amid tariff threats.
In the past six years, about 52% of Apple’s revenue has come from the iPhone. But the device is in a rut. Growth has been flat for two years, dragging down overall revenue. In the December 2024 quarter, iPhone sales slipped 0.8% year-on-year. In the March quarter, they rose just 1.9%. Earlier growth in iPhones was driven by customers upgrading their phones. They are less willing to do that now.
The China challenge
China has long been crucial to Apple—as a major consumer market and a manufacturing base. Today, it poses a twin threat.
Apple’s deep integration with Chinese supply chains makes it hard to relocate production without disruption. This makes it vulnerable to tariff threats from the Trump administration. It is moving some production to India, but tariff-related risks remain.
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Apple is also facing weakening demand in China. The iPhone’s share in the Chinese smartphone market fell to 15% in Q1 of 2025, against 21% in Q4 of 2023. Chinese brands such as Huawei and Xiaomi have gained share, a trend expected to continue. Only 21% of Chinese consumers would choose an iPhone for their next purchase, down from 29% a year ago, according to a Bloomberg Intelligence survey.
Apple’s position in the country is also complicated by the Chinese government’s ban on foreign technology in some workplaces and broader geopolitical tensions.
Services face headwinds
Apple’s sluggish iPhone sales have recently been offset by its services business. The division’s revenues jumped from $46 billion in 2019 to $96 billion in 2024, with its revenue share increasing from 17% to 24%. Profit margins of its services division are double those of its hardware business.
However, the practices that drive its services business are under regulatory pressure globally. The fees Apple collects from app developers, and the payments it gets from Google to be the default search engine on its devices (estimated at $20 billion a year), are facing legal challenges.
In the US, an antitrust lawsuit from the Department of Justice and 16 states has alleged that Apple stifles competition in cloud gaming, messaging and digital wallets. In Europe, the Digital Markets Act allowed third-party app downloads and alternative payment systems. Following backlash against its App Store commissions of 30%, Apple cut commissions in some categories, but also introduced new fees, angering developers.
AI laggard
AI is dominated by startups such as OpenAI and Anthropic, which have raised billions. Even traditional competitors like Microsoft, Samsung and other tech companies have integrated AI features into their products, but Apple’s progress remains slow. The company lost its position as the world’s most valuable company to Microsoft, partly due to concerns about its AI strategy.
User and investor disappointment with Apple’s AI ambitions goes beyond WWDC.
The upgraded Siri assistant faced delays due to bugs and performance issues. Apple Intelligence features are limited to newer devices only. The company relies on external partners like OpenAI rather than developing integrated AI solutions internally. AI is connected to Apple’s other challenges. iPhone sales have stagnated partly because Apple has failed to create compelling AI features.
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In China, Apple lacks a Chinese version of Apple Intelligence. Regulatory issues have delayed AI feature launches in Europe. It’s building to be a time of reckoning.
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Source:https://www.livemint.com/companies/apple-stock-2025-apple-wwdc-2025-apple-ai-strategy-iphone-sales-decline-apple-in-china-11749814318093.html