Apple could win in Uber-Didi deal
SAN FRANCISCO — There's a third party that could benefit from the $35 billion merger of ride-hailing service Didi Chuxing and Uber's Chinese business unit.
Apple may find itself in pole position in one of the hottest tech segments via its own $1 billion investment in Beijing-based Didi made less than three months ago. The combined Didi-Uber enhances Apple's standing in a country where its smartphone business is flagging, putting a dent in the company's revenue. Apple needs a sales boost to offset a decline in iPhone sales the last two quarters.
Apple CEO Tim Cook underscored the importance of the stake in Didi during a call with analysts after Apple released its results last week. He said the investment allows Apple to "learn a lot about the Chinese market beyond what we know."
Didi Chuxing to acquire Uber's China unit
What Apple knows about China is it holds vast potential but can be vexing. Its sales plunged 33% year-over-year because of a saturated smartphone market — Apple's share in May slid to 10.8% from 12% a year ago, dropping it from third place to fifth, according to Counterpoint Technology Market Research. The fop four smartphone makers — Huawei, Vivo, Oppo, and Xiaomi — were all local companies.
Apple must also navigate a market ruled by a Communist government while assuring consumers there that its products are secure. And it must grapple with a faltering economy that has prompted cost-conscious consumers to strongly consider lower-priced smartphones and laptops.
"Apple's to be congratulated for a successful bet (on Didi) but wither the company can parlay it into something larger remains to be seen," says Charles King, principal analyst at market researcher Pund-IT.
When Apple (AAPL) invested $1 billion in Didi in May, it firmly planted itself in the lucrative ride-hailing business in the world's most-populous country and its second-largest market. China accounted for $8.8 billion in third-quarter revenue, a region whose importance was underscored by Cook's trip to China in May.
Apple's $1B bet in China is all about timing
Should Apple proceed with its much-rumored car project in 2021, as The Information and others have reported, an alliance with Didi and Uber in China would immeasurably help its cause, either through car sales or the use of Apple-branded vehicles by both ride-hailing services. And if Apple bought into the ride-hailing market in China, what is to stop it from entering other countries?
Of course, the unpredictability of China bedevils Apple and others as much as its sheer market size and potential sales entices.
Despite its success in China, Uber may have been forced to join forces with Didi because doing business in China is an expensive prohibition.
“Sustainably serving China's cities, and the riders and drivers who live in them, is only possible with profitability,” Kalanick said in an email to UberChina employees.
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