This Is the Biggest Threat to Apple’s Business Around the World

This Is the Biggest Threat to Apple's Business Around the World

When is selling an iPhone not the same as selling an iPhone?

Easy: when you’re selling it in a country whose currency is declining in value. So how many is that? Well, in the last 18 months, it’s been pretty much all of them other than the United States. Indeed, the dollar has shot up about 22 percent against a trade-weighted basket of other currencies since the middle of 2014. And in Apple’s case, that’s meant what would have been $100 (roughly Rs. 6,800) of foreign sales in September 2014 was just $85 (roughly Rs. 5,779) by the end of 2015.

That’s not good when you get two-thirds of your revenue overseas.

The strong dollar, in other words, has become an earnings albatross for Apple. It’s getting paid in currencies that aren’t worth as much, and, at least up till now, it hasn’t made up for that by raising prices that much lest it lose market share. Even worse, it doesn’t look like any of this is going to get any better anytime soon. That’s because the Federal Reserve has begun raising rates at the same time that the rest of the world is either cutting them or even printing money.

Now there are two things to remember here. The first is that our slow-and-steady recovery really has won the race. Our unemployment rate is pretty much down to normal, and should get there soon considering that the economy has been adding an average of 284,000 jobs a month for the last three. It’s enough that the Fed thinks it has to increase interest rates today to keep inflation in check tomorrow. Everywhere else, though, things are either stagnant or slowing down to the point that policymakers are doing whatever they can to try to jumpstart growth.

And that brings us to point number two. People move their money to where it can get the best returns. So would you rather buy a 10-year German bond that pays 0.45 percent or a U.S. 10-year bond that pays 1.99 percent? Investors, especially big European ones, have been answering that by turning their euros into dollars, which is just another way of saying that there’s been more demand for dollars – so its price is rising. And it should keep doing so.

Consider this: Europe has promised to keep printing money through at least March 2017, Japan is printing its own with no end in sight, and China is facing big capital outflows itself. That means the euro, yen, and yuan would probably fall against the dollar even if we weren’t raising rates – but we are. The Fed says it wants to do so four times this year, which seems far too ambitious, but even just one or two would be enough to send the dollar up, up, up to, well, not quite infinity and beyond. But high enough that our workers and our companies would both see their bottom lines bottom out.

So it’s a great time to take that trip to Europe you’ve been thinking about, well, just as long as you weren’t planning on selling any iPhones.


Two extremes – how the rich and poor spend their Chinese New Year

Two extremes – how the rich and poor spend their Chinese New Year

Photo Credit: Thomas Peter/Reuters
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One of the biggest annual celebrations around the world is upon us. February 8 marks the start of the Lunar New Year in China. Also known as the Spring Festival, it is the most important holiday in the Chinese calendar, akin to Christmas in the West. An important time of family reunions and catching up with old friends, it is also a huge consumer holiday, as people usher in the year of the monkey.

Spending during this season in 2014 on shopping and dining was around 610 billion yuan – about $100 billion. This is almost double the amount American shoppers spent over the Thanksgiving weekend. The festival is celebrated by everyone and, in a country of extreme wealth that is also home to 7% of the world’s poor, the way that it is celebrated varies greatly.

There are a few things that all Chinese citizens have in common though. Most buy gifts for their parents and elderly family members, and 65% of respondents in a survey last yearshowed that clothes were a favoured item. Other significant areas of spending are decorations and fireworks, party goods, transportation costs and New Year’s dinner.

Another Spring Festival custom is to give friends and relatives money in red envelopes known as hongbao for good luck. China’s internet companies began to capitalise on this two years ago, with the popular messaging app WeChat launching a way to share money through messaging. Last year saw 500m yuan ($80m) transferred using the app, which we can only expect to increase this year as other apps offer the service too.

The long journey home

No matter how far away family members may have migrated across China, they are expected to make the journey home. As a result, Chinese New Year is believed to be behind the largest movement of people in the world. Up to 2.91 billion trips are expected to be made this year via road, railway, air and water, up 3.6% from last year, according to the National Development and Reform Commission, the country’s top economic planner.

Spare a thought for the 100,000 migrant workers stuck in Guangzhou train station in the heart of China’s manufacturing region due to train delays, as they try to make their long journey home for the holiday.

Migrant workers are the backbone of China’s low-cost and labour intensive economy. They make up an estimated 278m workers who have migrated from rural parts of China to work in the big cities and for many, Chinese New Year is their only holiday. It’s often the only chance they have to spend some time with their entire family, including children who are left with their grandparents.

Migrant workers also bring home their hard earned cash, which is vital to the local rural economy. Earnings from the big cities enable families to move into new and better homes, send their children to school, purchase livestock and other home additions such as new flat screen TVs.

The other half

A growing number of wealthier Chinese opt to avoid the New Year chaos and social obligations by travelling abroad for their holidays. Last year 5.2m left mainland China over the holiday. The most popular destinations are other countries in East Asia, as well as the US and Australia.

Chinese tourists are well known for spending big abroad. China is the biggest outbound tourism spending country, with vast amounts spent on luxury goods. Many Chinese consumers consider foreign products to be of superior quality and better designed than their domestic competitors – Hermès handbags, Burberry trench coats and Patek Philippe watches are often top of Chinese tourists’ shopping lists.

In 2015 Chinese consumers spent more than US$100 billion on luxury goods, accounting for46% of the world’s total. Around 80% of these sales are made abroad. Attracted by the weaker euro and Japanese yen, Chinese consumers are increasingly opting for Europe and Japan, instead of their traditional shopping hotspots of Hong Kong and Macau.

So as well as seeing the largest migration of its citizens as they crisscross the country, Chinese New Year sees a surge in spending by its elites both inside and outside of China. This feeds into the crucial shift the country is making from having an economic growth model driven by manufacturing to one based on consumption and services, of which tourism and entertainment are crucial elements.


Spotify Buys Music Social Network Apps Soundwave, Cord Project

Spotify Buys Music Social Network Apps Soundwave, Cord ProjectSpotify is stepping up the competition against Apple Music and major European rivals Deezer and Tidal with a pair of acquisitions aimed at making it easier to discover and share music with friends.

The Swedish music-streaming service has acquired Dublin- based Soundwave, an app downloaded more than 1.5 million times, praised by Apple Inc. co-founder Steve Wozniak and British actor Stephen Fry and invested in by Mark Cuban. It lets users explore music with private groups and see what music is trending nearby. The second purchase is Cord Project, a simple voice messaging service for phones, tablets and smartwatches. Financial details of the acquisitions were not disclosed.

Deezer simultaneously announced today it has raised EUR 100 million (roughly Rs. 740 crores) from a group of investors led by billionaire Len Blavatnik.

Spotify, with more than 20 million subscribers and a valuation of about $8.2 billion (roughly Rs. 55,724 crores), is expanding its services to win over customers as rival Apple adds to its 10 million subscriber base. Both Apple and Spotify give users access to more than 30 million songs, and charge identical monthly fees in many countries.

Streaming music is big business. Subscription and ad- supported streaming generated more than $2 billion (roughly Rs. 13,591 crores) in global sales in 2014, according to the International Federation of the Phonographic Industry, accounting for almost about a third of all digital music sales.

Even as artists such as Taylor Swift, Adele and more recently Coldplay have withheld new music from streaming sites, the services’ popularity has soared as consumers were attracted to the ease of use and instant access to millions of songs without having to own the collection. Spotify, for instance, doubled its subscribers from May 2014 to June 2015, and has more than 75 million users worldwide.


Has the Congress party virtually given up on the urban middle-class voter?
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The trajectory followed by the Congress since its defeat in the 2014 Lok Sabha election shows that the grand old party remains convinced that its most ardent supporters live in rural India even as the urban middle class remains smitten by Prime Minister Narendra Modi’s charms.

Consequently, the party is persisting with the agenda it followed during the 10 years when the United Progressive Alliance government was in power, taking up issues and programmes that impact farmers and marginalised sections like the Dalits, scheduled tribes, women and rural poor.

Having steered the UPA government’s “aam admi” agenda for a decade, Congress president Sonia Gandhi has passed on the baton to her son and party vice-president Rahul Gandhi who is now leading this campaign.

Suit boot ki sarkar

He started by espousing the cause of farmers with his high-pitched campaign against the Bharatiya Janata Party-led National Democratic Alliance government’s move to amend the land acquisition act.

Positioning the Congress as “pro-poor”, Rahul Gandhi kick-started his campaign against the Modi government last year by taking up the issue of the controversial land acquisition bill. He succeeded in painting the Modi government as “anti-famer and pro-corporate” and his description of the ruling dispensation as a “suit boot ki sarkar” hit the bull’s eye. The Congress was vindicated when the NDA government backtracked in the face of stiff opposition and put the amended land acquisition bill on hold.

After its success on the land bill, the Congress was emboldened enough to continue on this track when the BJP was routed in last year’s crucial Bihar assembly elections. While there is no denying that the Janata Dal (United)- Rashtriya Janata Dal-Congress alliance was helped by caste arithmetic, the three partners were also able to convince Bihar’s largely rural electorate that the BJP only cared for rich industrialists. The alliance consolidated the Dalit and Other Backward Classes vote in its favour when Rashtriya Swamaymsevak Sangh chief Mohan Bhagwat declared that he favoured a review of the reservation policy for marginalised communities.

The Congress resolve was further strengthened when the party started winning local body elections in the rural areas of Gujarat, Chhattisgarh, Maharashtra and Madhya Pradesh.

Rahul Gandhi has since followed it up by attempting to woo the scheduled castes by making two trips to Hyderabad University last month to support the students protesting the suicide of Dalit research scholar Rohith Vemula. At the same time, Gandhi is also working on a special Dalit agenda to win back the support of the scheduled castes that had once constituted the Congress party’s core constituency.

The Congress vice president is now preparing to reach out to the scheduled tribes with a proposed year-long campaign to put the Modi government in the dock for diluting the UPA government’s Forest Rights Act to deny forest rights to tribals.

Employment guarantee scheme

On Tuesday, the entire Congress machinery was galvanised to claim ownership of the Mahatma Gandhi National Rural Employment Guarantee Act on the 10th anniversary of the UPA government’s flagship programme and to showcase its commitment to welfare of the rural poor.

The party also chose to use this occasion to hit out at the the NDA government for suddenly discovering the virtues of MNREGA after Prime Minister Narendra Modi had initially mocked the programme, describing it as a “living monument” of the failures of the previous government. The Congress put out exhaustive details to dispute the Modi government’s claims that it had further strengthened MNREGA and to underline that the ruling alliance had actually destroyed the programme.

Rahul Gandhi specially travelled to Bandlapalli village of Andhra Pradesh’s Anantpur district from where Congress chief Sonia Gandhi and former Prime Minister Manmohan Singh had launched MGNREGA in 2006. He was accompanied by the former prime minister and a galaxy of senior leaders including Ambika Soni, Digvijaya Singh and Mukul Wasnik. At the same time, the party’s state units held special conventions to spread the word that this pro-poor scheme was the brainchild of the Congress. Rahul Gandhi will review the implementation of the programme with all state unit chiefs in Delhi on Friday.

Consolidation first

Congress leaders maintain that since the urban middle class remains favourably inclined to the BJP, it makes political sense to strengthen and consolidate its support in the rural hinterland where people are still willing to give it another chance though they too had turned their back on it in the 2014 Lok Sabha polls. “The middle class is, by nature, fickle,” said a senior Congress leader. “It was the biggest beneficiary of economic reforms but it lost no time in shifting its loyalties to the BJP.”

The same urban middle class, which is today mesmerised by Modi magic, had come out in overwhelming support of the Congress in 2009, enabling the UPA government to have a second term. The party notched up big victories in semi-urban centres and cities, thanks largely to Manmohan Singh who had then emerged as a middle class icon, just like Modi is at present.

Although there is overwhelming support in the party for its move to concentrate on the rural hinterland, there is also a growing view in the Congress that it cannot afford to ignore the urban middle class, especially when Rahul Gandhi is making a concerted effort to win over young people.

The vocal urban voter and the country’s growing young population, they emphasise, play a critical role as opinion makers and this vital fact cannot be overlooked. The young voter played a critical role in fashioning Modi’s 2014 victory, just was an important factor in ensuring Aam Admi Party’s successful debut in Delhi.

Rahul Gandhi’s supporters, however, maintain that the Congress has always stepped in to voice the concerns of the people both in rural and urban areas. Former ministers Jitin Prasad and RPN Singh insist that the party vice-president has highlighted issues which are urban-centric and that he is making a serious effort to connect with the youth with his periodic visits to colleges and universities. “He has taken up the issueof net neutrality, intolerance and freedom of speech which concern the youth,” Singh pointed out.