Apple Faces Stock Dip but Sees Hope in China Sales and Indian Manufacturing Expansion

As of last week, Apple (AAPL) experienced a decline of 1.38%. Over the past week, the stock dropped 3.66%, amounting to a 21.39% decrease year-to-date, with a current market capitalization of $2.934 trillion. Despite recent dips, Morgan Stanley remains optimistic, maintaining an “overweight” rating and a target price of $235. The firm's analysis attributes the positive outlook to significant sales surges from China’s 618 shopping festival and governmental subsidies, which are predicted to boost quarterly revenue by up to $4 billion. These factors could provide short-term support to Apple's valuation, which is currently near a two-year low.

In particular, Morgan Stanley highlights the robust sales of iPhones and iPads in the Chinese market, expecting a higher-than-anticipated shipment volume in the second quarter. This includes a projected iPhone output of 46.5 million units, a year-over-year growth of 19%, and iPad output of 14.5 million units, up by 38%. Morgan Stanley forecasts iPhone shipments could reach 49 million units, 7% higher than their previous estimates, while iPad shipments might surpass expectations by 20%.

However, the report cautions that while the second quarter's demand remains strong, some demand might have been prematurely advanced, particularly as the 618 events conclude early in the third quarter. Subsequently, iPhone and iPad sales growth might decelerate. The third quarter is expected to see iPhone production of 50 million units and iPad output of 14 million units.

Apple's expansion into Indian manufacturing continues positively, with projections suggesting production might reach 47 million units by 2025, marking a significant increase from 2024's 28 million units. Should this trajectory be maintained, by the end of 2026, iPhones shipped to the U.S. might predominantly originate from India.

Customs data from March to May indicates that almost 97% of iPhones exported from India by Apple's major contractor Foxconn were sent to the U.S., illustrating Apple's strategic shift to mitigate U.S. tariffs on Chinese goods. Over this period, Foxconn exported iPhones valued at around $32 billion from India, with 97% directed to the U.S., a stark contrast to the 2024 average shipment proportion of 50.3%.

Beyond production shifts, Apple's competitive dynamics in China continue to evolve with domestic rivals intensifying market pressure, necessitating price reductions to maintain competitiveness. In May, Chinese e-commerce platforms offered notable discounts on the latest iPhone models.

Apple's CEO, Tim Cook, has articulated a clear vision for Apple TV+, emphasizing its status as an independent storytelling platform rather than an extension of iPhone marketing efforts. Cook outlined the company's commitment to crafting quality narratives alongside robust business operations, distancing the service from strategic hardware pushing.

Apple TV+ and Apple Original Films function in tandem, with the latter producing films that often premiere exclusively on the streaming service. Recent endeavors include the forthcoming F1-themed film starring Brad Pitt and co-produced with Warner Brothers, set to release in cinemas before streaming exclusively on Apple TV+.

Furthermore, Apple anticipates launching a long-delayed Siri AI upgrade, signifying a pivotal adaptation in its AI strategy. Slated for Spring 2026 as part of the iOS 26.4 update, the enhanced Siri promises refined user interactivity, leveraging personal data for more precise responses. This upgrade has been in development since its announcement at last year's developer's conference, facing internal delays largely attributed to software integration challenges.

While the company anticipates executing its grand AI vision incrementally, the timeline adjustments for the new Siri iteration have reverberated across Apple’s product continuum. Most notably, smart home devices relying on upgraded Siri functionalities have seen deferred launches, highlighting operational hurdles in Apple's evolving AI landscape.