Zhitong App has learned that Apple, once the undisputed king in the tech industry, is now facing challenges on many fronts. The demand for Apple products in the Chinese market is cooling down, and the highly profitable App Store is facing pressure from European regulatory authorities. The company also recently halted its highly anticipated and nearly $10 billion investment in the car manufacturing project.
As Apple faces more and more challenges, its valuation has also been impacted. After reaching a record $3 trillion market value last year, the company's market value has evaporated by billions of dollars in recent weeks. Meanwhile, Microsoft (MSFT.US) has surpassed Apple to become the world's most valuable company.
Here are the top ten challenges that Apple is facing globally:
1. Regulatory Pressure from the EU
The EU's Digital Markets Act will come into effect this week, posing a new threat to Apple's &#34;walled garden.&#34; Apple's ecosystem may be the most successful closed-loop system in history, not only because of the seamless integration and connectivity between Apple products but also because the system has built an extremely high &#34;outer wall&#34; - almost never open to third-party devices and service providers.
However, under the pressure of the Digital Markets Act, Apple has made a significant strategic adjustment. Starting in March 2024, European Apple users will be allowed to download apps from third parties, not just limited to its own App Store. At the same time, the Apple App fees in the EU region will be reduced from the original 30% to 17%, or from the discounted 15% to 10%. Users will also be able to use other payment methods and more easily choose a new default web browser.
However, Apple has long been opposed to these adjustments, believing that they will undermine user experience and software security. A bigger threat to Apple is that this business model, which has brought the company hundreds of billions of dollars in revenue annually, may suffer a significant blow as a result.
In addition, the EU imposed a hefty fine of 18 billion euros (approximately $20 billion) on Apple earlier this week for suppressing music streaming competitors, including Spotify (SPOT.US), on its platform. Apple has stated that it will appeal the EU's decision, sparking a potential legal battle that could last for years.
2. Lawsuits from the US Department of Justice
The US Department of Justice has been investigating Apple for five years and is now close to filing a lawsuit. US antitrust enforcers stated that Apple imposed software and hardware restrictions on the iPhone and iPad, making it harder for competitors to participate in the competition. The lawsuit is expected to be filed by the end of March. Apple representatives also had a final meeting with the US Department of Justice in February, trying to persuade the agency not to proceed with the lawsuit. However, it is worth noting that a recent US federal spending agreement will limit the available funds for antitrust enforcement agencies, which may affect the timing of the Department of Justice's lawsuit against Apple.
3. Lagging Behind in the Field of Artificial Intelligence
In October last year, Apple quietly introduced an open-source artificial intelligence model called Ferret, capable of understanding images. However, the company has yet to release any consumer-facing products related to generative artificial intelligence. So far, Apple seems to have not taken any significant steps in the field of artificial intelligence, lagging behind other tech giants in applying breakthrough technologies. This has led to Apple's stock price underperforming in the latest wave of artificial intelligence hype. The market believes that while Apple once dominated the market with unique innovation, its innovative competitiveness as the world's most important technology hardware company is significantly diminishing as competitors catch up.
However, Apple CEO Tim Cook stated at the end of February that the company is investing heavily in the field of artificial intelligence. Cook also mentioned, &#34;Later this year, I look forward to sharing with everyone how we will make progress in generative artificial intelligence, which we believe is another technology that can redefine the future.&#34;
With the halt of the car manufacturing project, some members of the related project team (internally referred to as the &#34;Special Projects Group&#34; or SPG) will focus on generative artificial intelligence projects under the leadership of executive John Giannandrea. This rapid strategic shift by Apple further indicates that artificial intelligence is becoming a top priority for Cook.
Cook is also redefining several Apple products that have already been released as &#34;AI-driven&#34; to emphasize the company's long-standing commitment to this technology. Despite Apple's assurance to investors that artificial intelligence has long been integrated into its hardware and services, it is clear that Apple needs to make a bigger splash in the field of artificial intelligence, which may happen at Apple's developer conference in June.
As competitors like Samsung have already launched smartphones with AI capabilities, Apple must catch up. Apple's software chief Craig Federighi has instructed his team to develop as many AI features as possible for this year's operating system updates. It is reported that Apple is also about to complete a crucial new software tool aimed at application developers, relying on artificial intelligence to speed up task completion.
4. Cooling Demand in the Chinese Market
According to a report by market research firm Counterpoint, in the first six weeks of 2024, Apple's iPhone sales in China decreased by 24% compared to the previous year, and the company's market share in the Chinese smartphone market dropped to 15.7%.
Analyst Ming-Chi Kuo from TF International Securities pointed out that Apple has reduced the orders for key semiconductor components used in the iPhone 15 and iPhone 16. It is estimated that the total shipment volume of iPhones in 2024 will decrease to 200 million units.
The analyst's forecast is based on Huawei's return to the Chinese market and the shift of the high-end smartphone market towards AI and foldable designs.
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5. The Disappearance of Apple Car
When the news of Apple halting its car project came out, investors cheered as it meant the company would no longer have to spend billions of dollars on a seemingly hopeless project. However, the end of the car project also meant Apple lost an important product. Despite the challenges of manufacturing electric cars, Apple could have priced its electric car at $100,000, which would have boosted sales. Apple's revenue dropped by 3% in the last fiscal year, the largest decline since 2016.
Abandoning the car project has raised concerns among some investors that Apple is being conservative and no longer boldly venturing into new areas as it used to.
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6. Vision Pro
Apple's mixed reality headset was launched on February 2nd, receiving high praise from reviewers and early users. However, priced at a hefty $3,500, and its weight not suitable for long-term wear, many software developers have delayed plans to develop dedicated applications for this headset. This makes the rationale for Vision Pro less clear.
Cook's initial vision was to create a lightweight augmented reality glasses for all-day wear. However, the technology for such a device is not ready yet, so Apple had to compromise and release a larger and heavier mixed reality headset. Apple needs to make Vision Pro lighter, cheaper, and more appealing to ordinary consumers, a process expected to take several years.
7. Sluggish Tablet Sales
After the popularity of the iPad for over a decade, many consumers are no longer interested in tablets. Data from research firm IDC shows that in 2023, tablet sales hit the lowest level since 2011. While this is not solely Apple's issue, Apple's iPad accounts for 40% of total tablet shipments. Therefore, the sluggish tablet market is undoubtedly bad news for Apple.
Some consumers have switched to larger smartphones or laptops. Apple has not released a new iPad in the past year. However, the good news is that Apple is preparing to launch a new iPad. It is reported that Apple has been developing two new versions of the iPad Air, with 10.9 inches and 12.9 inches respectively, and the 12.9-inch model will be the largest iPad Air size in Apple's history. In addition, Apple is expected to launch the first iPad Pro with an OLED screen.
8. Legal Dispute over Smartwatches
Due to a legal dispute with medical device manufacturer Masimo, Apple has recently had to rare stop selling smartwatches with blood oxygen sensors. Smartwatches are a core product of Apple's wearable devices, home, and accessories department, which contributed over 10% of revenue in the last fiscal year, nearly $40 billion.
Although Apple can remove the blood oxygen monitoring function to relaunch its smartwatches for sale, for a company that rarely faces such situations, this is an embarrassing legal setback. The loss of the blood oxygen feature may also hinder Apple from adding functions to its smartwatches in the future, such as measuring high blood pressure and detecting sleep apnea.
9. Talent Drain
At Apple, executive turnover is common, and the company has a strong management team. However, in recent months, Apple has lost some outstanding executives, especially in the design team. Bart Andre, Apple's longest-serving senior industrial designer, will leave, and top designers Colin Burns, Shota Aoyagi, and Peter Russell-Clarke all left around the end of last year. Several veterans of Apple's software design team have also hinted that they plan to leave in the near future.
Now, the team once led by the legendary figure and former Chief Design Officer of Apple, Jony Ive, a team that helped define Apple's aesthetics, has almost completely disappeared. Jony Ive's successor, Evans Hankey, also left last year. Apple's product design team now reports to the company's Chief Operating Officer, Jeff Williams. Some insiders have indicated that having an operations executive manage a department dedicated to design and innovation has angered some employees, and cost-cutting measures have exacerbated employee dissatisfaction.
10. Challenging Quarter
Against the backdrop of many unfavorable factors, Apple's next earnings report may be a bitter pill for investors. The company has warned that the numbers will not look good compared to the same period last year. Analysts predict that Apple's revenue in the second quarter of the 2024 fiscal year will drop by about 4%, meaning that the company's revenue has declined in five out of the past six quarters.
Rosenblatt Securities analyst Barton Crockett stated, &#34;In our view, Apple's stock price is at a crossroads.&#34; He added that the failed car project and the immature Vision Pro have dimmed Apple's shine. The current question is whether Apple's push towards generative artificial intelligence can help the company regain its former glory.

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Apple is facing multiple challenges, including cooling demand in the Chinese market, regulatory pressure in Europe, and the suspension of its car project. These challenges have led to a decline in Apple's market value, allowing Microsoft to surpass Apple as the world's most valuable company. The EU's Digital Markets Act poses a threat to Apple's "walled garden," forcing Apple to adjust its strategy. Additionally, the EU has imposed hefty fines on Apple. These challenges may have a significant impact on Apple's business model.

Besides the decline in AI and Apple's sales in China, Apple is also facing many challenges.