Apple's (AAPL) Vision Pro officially hit the market on Friday, marking the company's most significant product launch since the Apple Watch in 2015. But Wall Street's enthusiasm for the company's most ambitious product in years subsided after Apple reported that: This was due to a slowdown in sales in China in the first quarter of the fiscal year.
The Vision Pro is, as Apple calls it, a spatial computer. But for the average person, this is a high-performance AR/VR headset.
I originally used Vision Pro after Apple announced it during its WWDC event in June 2023, and again just before its launch on February 2nd. And yes, it's every bit as impressive as you heard.
But as Apple searches for its next major product platform, much is riding on the Vision Pro's long-term success. And with storm clouds swirling over Apple's Cupertino headquarters, the company needs a win now more than ever.
Apple's 2024 got off to a rough start.
Apple has been dealing with a number of challenges through the first few weeks of the year, but the outlook isn't looking brighter in February. But the most pressing issue facing the company right now is a slowdown in sales in Greater China.
China, Apple's third-largest market after North America and Europe, has seen years of growth for Apple as the country's expanding middle class and surging smartphone sales have provided fertile ground for the iPhone's popularity in the region. It has been an important catalyst for the story.
According to Counterpoint Research, Apple remained the best-selling smartphone brand in China in Q4 2023, capturing 20% of the market. In comparison, local rivals Xiaomi, Huawei and Honor had 16%, 15.2% and 15.1% respectively. However, Huawei's market share increased by 71.1% year-on-year thanks to its new 5G smartphones, while Apple's market share decreased by 9%.
This, combined with China's economic downturn, meant that Apple's overall Greater China revenue would decline from $23.9 billion in Q4 2022 to $20.8 billion in Q4 2023.
If Apple's market share decline is permanent, with the smartphone market projected to grow 3% in 2024, UBS analyst David Vogt said, “the decline in China share would be due to the iPhone's “It's hurting revenue by over $7 billion, with a 3.5% headwind to iPhone revenue and a ~1.9% companywide headwind.”
Regulatory headwinds are raging
Apple also finds itself mired in a tangle of regulatory issues in the European Union as it works to navigate the European Union's Digital Markets Act (DMA). The DMA, which is scheduled to take effect this year, will ensure that large technology companies do not have too much power over the broader technology ecosystem. So far, Apple has opened up its platform to allow users in the region to install third-party app stores and for app developers to offer users third-party payment options beyond Apple's in-app payment system. They have announced that they will be able to do so.
But there's a catch. Even if developers decide to use an external payment option, they will still need to hand over cash to Apple. However, the tech giant said the fee, worth 50 euro cents, would only apply to developers whose apps are downloaded more than 1 million times a year. After that, you will have to pay for each download.
Critics, including Spotify CEO Daniel Ek and Epic CEO Tim Sweeney, hit back at Apple with the following: Ek calls new rules “hostile” And Sweeney said that “Another example of malicious compliance.” The EU still needs to determine whether Apple's new rules are DMA-compliant.
Meanwhile, in the United States, Apple is closely monitoring the possibility of antitrust litigation by the Department of Justice. According to the New York Times, the Justice Department is investigating how Apple controls its hardware and software as a way to lock consumers into its ecosystem and fight competitors. Any lawsuit could take years to work its way through the legal system, but it could distract companies as they seek to enter new product categories.
Introducing Vision Pro
Vision Pro serves as Apple's next-generation computing platform. At $3,499, it's not affordable to the average consumer, but that doesn't diminish its importance to the company.
After years of development, the headset will never fail. Also, although I was only able to use him briefly in two approximately 30-minute sessions, it's hard to imagine that we'll see a competitor come close to matching what Apple offers in the near future.
The display is the clearest I've seen on an AR/VR headset, the fit is comfortable, and the interface is incredibly easy to navigate. Apple boasts a huge library of apps for the Vision Pro, but it's missing notable giants like Netflix and YouTube.
The Vision Pro is also powered by an external battery, which Apple says has a battery life of two hours, which may be an annoyance to some users.
We'll go into more detail about what it's like to use the Vision Pro long-term, but it's safe to say that Apple has created some amazing technology. Now it needs to be sold to the general public.
Add this to the list of challenges the company must overcome in the coming year.
daniel howley I'm the technology editor at Yahoo Finance. He has been covering the technology industry since his 2011. You can follow him on Twitter. @Daniel Howley.
Click here for the latest earnings report and analysis, earnings whispers and expectations, and company earnings news.
Read the latest financial and business news from Yahoo Finance
