Apple’s (AAPL) Vision Pro officially hit the market on Friday, marking the most significant product launch for the company since the Apple Watch back in 2015. But the enthusiasm for the company’s most ambitious product in years was tempered on Wall Street after Apple reported a slowdown in China sales during its fiscal first quarter.
The Vision Pro is, as Apple calls it, a spatial computer. But for the average person, it’s a high-powered AR/VR headset.
I originally used the Vision Pro after Apple debuted it during its WWDC event in June 2023, and again just before its Feb. 2 launch. And yes, it’s every bit as impressive as you’ve heard.
But a lot is riding on the Vision Pro’s long-term success as Apple looks for its next major product platform. And with storm clouds swirling above Apple’s Cupertino headquarters, the company needs a win more than ever.
Apple’s rough start to 2024
Apple has been dealing with an array of difficulties throughout the first few weeks of the year, and it’s not looking any brighter going into February. But the most pressing issue the company is facing at the moment is a slowdown in sales in Greater China.
Apple’s third-largest market behind North America and Europe, China has been a key catalyst in Apple’s growth story over the years as the country’s expanding middle class and a surge in smartphone sales provided fertile ground for the iPhone’s popularity to take off in the region.
According to Counterpoint Research, Apple was still the bestselling smartphone brand in China in Q4 2023, capturing 20% of the market compared to local rivals Xiaomi, Huawei, and Honor, which took 16%, 15.2%, and 15.1%, respectively. But Huawei saw its year-over-year market share jump 71.1% from the year prior thanks to its new 5G smartphones, while Apple’s fell 9%.
That, coupled with China’s lumbering economy, meant that Apple’s overall Greater China revenue declined from $23.9 billion in Q4 2022 to $20.8 billion in Q4 2023.
According to UBS analyst David Vogt, if Apple’s market share decline is permanent and the smartphone market grows a predicted 3% in 2024, “lost share in China could pressure iPhone revenue by slightly more than $7B, a 3.5% iPhone revenue headwind and ~1.9% total company headwind.”
Regulatory headwinds abound
Apple also finds itself in a tangle of regulatory problems in the European Union as it works to navigate the bloc’s Digital Markets Act (DMA). Set to go into effect this year, the DMA ensures large tech companies don’t have too much power over the broader tech ecosystem. So far, Apple has announced that it will open up its platform, allowing users in the region to install third-party app stores and giving app developers the option to offer users third-party payment options beyond Apple’s in-app payment system.
But there’s a catch. If developers decide to use outside payment options, they’ll still have to fork over cash to Apple. The tech giant, however, says the charge, which amounts to a 50 euro cent fee, only applies to developers whose apps are downloaded more than 1 million times in a year. After that they’ll need to pay that charge for each subsequent download.
Critics, including Spotify CEO Daniel Ek and Epic CEO Tim Sweeney, have struck back at Apple with Ek calling the new rule “hostile” and Sweeney saying it’s a “devious new instance of Malicious Compliance.” The EU still has to determine if Apple’s new rules comply with the DMA.
In the US, meanwhile, Apple is staring down a potential Department of Justice antitrust lawsuit. According to the New York Times, the DOJ is looking into how Apple controls its hardware and software as a means of keeping consumers locked into its ecosystem and fighting off competitors. While any lawsuit could potentially take years to wind its way through the legal system it could distract the company at a time when it’s seeking to push into a new product category.
Here comes the Vision Pro
The Vision Pro serves as Apple’s next-generation computing platform. At $3,499 it’s not exactly priced to move for the typical consumer, but that doesn’t minimize its importance for the company.
After years of development, the headset can’t fail. And while I’ve only been able to use it briefly across two separate roughly 30-minute sessions, it’s hard to imagine a competitor matching what Apple has to offer anytime soon.
The display is the sharpest I’ve seen on an AR/VR headset, the fit is comfortable, and the interface is incredibly easy to navigate. Apple boasts an enormous library of apps for the Vision Pro, though there are notable big names missing, including Netflix and YouTube.
There’s also the fact that the Vision Pro is powered by an external battery that Apple says gets two hours of battery life, which could be a turnoff for some users.
I’ll dive deeper into what it’s like to use the Vision Pro when I get my hands on one for an extended period, but it’s safe to say Apple has created an incredible piece of technology. Now it needs to sell the general public on it.
Just add that to the list of challenges the company will have to overcome in the year ahead.
Daniel Howley is the tech editor at Yahoo Finance. He's been covering the tech industry since 2011. You can follow him on Twitter @DanielHowley.
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