Apple's "gains and losses" in Europe

Figure: Figure worm

Source: 21tech

Author: Yi Jiaying Tao Li

Editor: Zhang Weixian

Apple has experienced a lot of ups and downs in the European market.

On March 2, according to the official website of the "Reference News", the US technology giant Apple announced on March 1 local time that it would suspend all product sales in Russia. In addition to the economic losses caused by this decision, Apple also continued to suffer heavy penalties for "monopoly".

A few days ago, the Dutch regulator once again imposed an antitrust fine of 5 million euros on Apple, and has now accumulated a fine of 30 million euros. On the other hand of the ongoing regulatory friction in Europe, Apple still has a growth rate of more than 20% in the European market.

Pan Helin, co-director and researcher of the Digital Economy and Financial Innovation Research Center of Zhejiang University's International United Business School, pointed out in an interview with the 21st Century Business Herald that Apple's business in the European market will suffer a certain impact due to anti-monopoly in the future. Apple does involve monopoly, but the specific impact depends on the penalties imposed by antitrust, especially the proportion of commissions on its Apple Store, which will be the key to whether Apple can maintain profits.

In his view, from the perspective of supervision and market, supervision has not touched the fundamental problem of Apple ecology, and has not touched the fundamental core of monopoly, that is, there are high conversion barriers to users in Apple ecology.

Controversy over "Apple Tax"

In recent years, the Dutch Consumer and Market Authority has been investigating whether Apple has abused its dominant position. Meanwhile, the Dutch dating software developer has repeatedly filed lawsuits against Apple, asking regulators to investigate the monopoly of Apple's app store payment system.

Not long ago, Apple was fined 5 million euros (about 36 million yuan) in the Netherlands for the third consecutive week because its app store still did not open a third-party payment system for dating apps in accordance with the requirements of dutch regulators, with a cumulative fine of 3,000 euros. This topic also once rushed to the hot search and was paid attention to around the world. The fine of 5 million euros per week has not stopped as of this week.

Margrethe Vestager, head of digital policy at the European Union, also slammed Apple for refusing to rectify and deliberately choosing to pay fines to avoid complying with the Dutch antitrust order, which allows dating apps to introduce third-party payment technology when selling in-app content.

Vestagle said Apple "actually prefers to pay fines on a regular basis rather than comply with the Dutch Competition Authority's provisions on third-party payments on the App Store."

In the face of opposition from many sides, Apple finally gave in, announcing that it would comply with the ruling of the Dutch Consumer and Market Authority. Apple said on January 15, local time, that it will comply with the ruling of the Dutch Consumer and Market Supervision Bureau, allowing users to use two other payment methods in addition to apple systems when downloading dating software in the online Apple Store. But both payment methods only work for dating apps, and Apple still deducts commissions from them.

Notably, just on Monday, Apple submitted a letter to the Dutch consumer watchdog saying that the company had complied with an order to open the AppStore to the payment provider of the Dutch dating app. This is also the first time that Apple has bowed its head and abolished the "apple tax" in disguise.

The so-called "Apple tax", that is, most of the software of merchants in the Apple App Store will force users to pay using Apple's own payment system, and Apple will take 15%-30% commission from it. Although it has not been disclosed in detail in the earnings report, it is clear that this link has brought great benefits to Apple.

The company's latest financial report shows that in the fourth quarter of 2021, Apple's comprehensive gross profit margin reached 43.8%, an increase of 4 percentage points year-on-year, a new high in 10 years. Among them, the gross profit margin of the software business reached 72.4%. At the same time, Apple also set a new record, with a single quarter revenue of $123.945 billion and a net profit of $34.630 billion in the fourth quarter.

Not only the "Apple tax", the EU is expected to adopt a policy of harmonizing charging specifications for mobile phones, tablets and headphones by the end of this year. In this regard, an Apple spokesperson also objected: "We are worried that such a strict management of chargers will only stifle innovation, not encourage innovation, which in turn will harm the interests of consumers in Europe and around the world." ”

"Regular Customers" of Antitrust Agencies

It is precisely because of the special market position of "Apple Tax" that Apple has become a "regular customer" of anti-monopoly agencies in many countries and regions.

In 2020, two wholesalers of Apple were also fined by France. Apple was fined 25 million euros (about $28 million) by french consumer watchdog DGCCRF for not notifying iPhone users of the possibility of slowing down the device. That same year, Apple was again fined 1.1 billion euros in a French antitrust case.

Italy's antitrust regulator has also fined Apple for "speed reduction". In 2021, Italy issued two consecutive fines to Apple in a week, and was fined 134.5 million euros (about 970 million yuan) and 10 million euros (about 72 million yuan) respectively.

Previously, the European Union also introduced the Digital Marketplace Act, which included provisions requiring companies such as Apple to allow third-party app stores to run on their devices. Craig Federighi, Apple's senior vice president of software engineering, even said the bill's requirements would undermine iPhone security and create a "gold rush" of malware.

In Pan and Lin's view, supervision has not touched the fundamental core of monopoly, that is, there are high conversion barriers for users in the Apple ecosystem. It is only a penalty for individual points of the Apple ecology. "For example, if a user buys an APP at Apple, can it be used in the Android system?" Of course, there is no way to break the barriers in the current smartphone ecosystem, not only Apple, Samsung and other brands in Android mobile phones, but also to create their own ecological barriers. ”

Market competition has intensified

According to a new report from market research firm Counterpoint Research, Apple's smartphone business grew 25% year-over-year in the European market in 2021 and hit an all-time high market share in the region by December 2021.

Throughout 2021, Apple's total market share in Europe was 26%, up from 22% in 2020. In 2021, Samsung's market share is slightly higher at 32%, and the gap between the two has been shortened. In addition, Apple's total market share at the end of the year was 33%, which is also its highest share in Europe to date.

Some analysts pointed out that Apple's market share in European smartphones increased significantly last year, mainly due to the iPhone 12 and iPhone 13 that support 5G network connectivity.

Apple's iPhone 12 launched in October 2020 and the iPhone 13 series smartphone launched in September last year have provided users with new options for purchasing high-end 5G smartphones in a timely manner against the background of the expanding coverage of 5G commercial networks in many European countries.

In this regard, Pan and Lin pointed out that Apple products have a certain degree of user stickiness in the world, which will increase the conversion cost of users, that is, user data information, the app purchased is equal to the deep binding of Apple accounts, so that users cannot switch to use other products, and Apple is becoming more and more comprehensive in the ecology of electronic consumer goods, gradually guiding old users to buy other Apple ecological products, and achieving a closed loop in the Apple ecology.

According to Apple's financial report for the first fiscal quarter of 2022 (the fourth quarter of 2021), in the fourth quarter of 2021, Apple achieved sales revenue of 123.945 billion US dollars (about 789 billion yuan), an increase of 11% year-on-year, setting a record for the company's single quarter revenue; achieving a net profit of 34.630 billion US dollars, an increase of 20% year-on-year, equivalent to 220.437 billion yuan, equivalent to a net profit of nearly 2.4 billion yuan per day, and the profitability is amazing. Among them, the Revenue of the European Region was US$29.749 billion, an increase of 9% year-on-year.

Jan Stryjak, deputy director of Counterpoint Research, predicts that the European market will be more intense in the coming months, and the head mobile phone company is expected to launch some impressive flagship devices. Brands, including Xiaomi and Samsung, are working on new models to grab more market share.

As of March 3, re:Store, a company specializing in Apple products in Russia, has reopened. A spokesman for the company said all of its stores in 25 Russian cities are now operating normally, selling exactly the same categories as before, including iPhones, computers, watches and other accessories. However, at present, Apple Pay is still not available in Russia.

Editor: Lu Taoran