Consumers May Be Cooling Toward Apple
Oct 10, 2012 5:00 AM PT
Apple stock ascended to a record high earlier this year, but the company has experienced a slight fall from grace in the past few weeks, with the stock down 10 percent from its all-time high of US$705.07 on Sept. 21, the day the company launched the highly anticipated iPhone 5.
Judging by the post-launch social buzz about the products, some of Apple's shine might be wearing off, said John Feland, CEO and founder of Argus Insights.
"Our tracking of social capital shows that the consumer market is falling out of love with Apple," he told MacNewsWorld.
Still, the company's stock is up 55 percent on the year and remains the leader in market capitalization over its next highest competitor, ExxonMobile, and there seems to be excitement generating around the stock about a possible iPad Mini.
Lift from Rumors
Rumors of the smaller iPad heated up this week, with The Wall Street Journal reporting that Apple ordered 10 million devices from its Asian supplier. The report indicated the new tablet could hit shelves just in time to compete with Amazon's Kindle Fire and Google's Nexus 7 during the holiday shopping season. While it's no question Apple has the ecosystem and consumer base needed to compete on that level, the company hasn't named a price point, said Feland.
Without knowing if it plans to launch a product that could rival the Kindle Fire and Nexus 7 in price (both retail for around $199) it's impossible to know whether an iPad Mini could be another record-seller for Apple. Even though Apple might not like taking lessons from tech competitors, it only has to look as far as HP to see how badly a premium-priced product could fall short, said Feland. The TouchPad, originally priced at $500 for the 16GB model, failed to meet expectations and was pulled after a short time on the market.
"The bombing of the HP Touchpad showed the chink in Apple's armor, price," he told MacNewWorld. "At $99, consumers snapped up whatever inventory HP and their retail partners had because at the end of the day, people want tablets to surf the Web, watch movies, read email and play games."
Trouble in China?
Apple's stock decline isn't the only negative news surrounding the company. Workers at Foxconn, one of the major assembling factories for the company's smartphones, were reportedly overwhelmed with new quality demands meant to prevent casing scratches on the iPhone 5, according to a report from China Labor Watch. As many as 4,000 may have walked off the job and then returned to work, which could cause a delay in iPhone 5 availability, according to the report.
Foxconn denied any workers were on strike and said the incidents were under control. But part of Apple's decline on the stock market could be because of supply chain delay of some sort, said Shaw Wu, analyst at Sterne Agee, although he remained confident Apple would keep up with demand.
"Our sources indicate that the iPhone 5 is not easy to build with Apple's very high standards where it aims to produce each model to be an exact replica, and where variance is measured in microns," Wu told MacNewsWorld. "It is overwhelming demand that is causing lead times to remain at three to four weeks and low stock at the retail level despite increased production."
Paying for Standards
Foxconn and Apple are no strangers to labor disputes, having previously been the subject of consumer outrage for allowing unfair working conditions and wages. Apple has since taken measures to improve conditions at the Taiwanese plant, including lessening overtime, raising wages and ensuring better factory safety.
This time around, however, the incident was different, said Li Qiang, executive director of China Labor Watch. Whereas previously labor rights and consumer advocacy groups argued on behalf of improving working conditions at Foxconn and other major supply chain factories, this time the protests started within Foxconn as a direct result of quality control standards imposed by Apple, said Qiang.
"This incident totally differs from those in the past," he told MacNewsWorld. "When workers cannot meet those high standards, they are returned by quality inspectors, and those inspectors are getting beat up. Because they were afraid if they continued to carry on with those high standards they would get beat up again, they went on strike."
Apple has not responded to the claims from China Labor Watch. If it does, said Qiang, it should be to acknowledge that there are challenges involved with producing top-quality iPhones, iPads and iPods.
"If Apple wants higher standards, it should give the workers proper training, benefits and wages so they can meet those standards," he said.
Apple did not respond to our request for comment on any aspect of this story.