Tech giant Apple (AAPL:NASDAQ) saw the launch of its latest iPhone 16 eclipsed by a looming €13 billion Irish back taxes bill and Huawei’s own new smartphone launch.
Apple has been a long-run target of the European Union’s crackdown on Big Tech firms, and the EU’s Court of Justice’ decision to back a landmark 2016 decision that Ireland broke state-aid law by giving Apple an unfair advantage comes as a significant blow.
Apple’s chief executive officer Tim Cook has previously blasted as ‘total political crap’ the EU’s 2016 move to order the firm to pay €13 billion in back taxes. The EU’s antitrust chief Margrethe Vestager ordered Ireland to claw back the sum, which amounts to about a third of Apple’s second quarter 2024 iPhone revenue. The money has been sitting in an escrow account pending a final ruling.
‘The ECJ’s decision is a dramatic one not least as it overturns the findings of the EU General Court beneath it, which had upheld Apple’s appeal against the Commission’s findings that it had received unlawful state aid through tax advantages granted by the Irish government’, said Alex Haffner, a competition partner at law firm Fladgate.
‘From a financial perspective Apple will now have to forgo €13 billion that has been sitting in escrow pending the outcome of the case. But perhaps of more relevance will be the sense that, again, the EU authorities and courts are prepared to flex their (collective) muscles to bring Big Tech to heel where necessary.’
Shares in Google-owner Alphabet (GOOG:NASDAQ) – which itself lost a challenge over a €2.4 billion fine for abusing its market power, and Meta Platforms (META:NASDAQ) saw their stock prices come under pre-market pressure,albeit modest.
Competitors are also piling on the pressure. China’s Huawei reported a record three million pre-orders for its new z-shaped triple-folding Mate XT smartphone at its own launch event just hours before Apple’s.
This highlights the growing competition between the two brands, especially in the crucial Chinese market. Huawei has recovered from recent setbacks and is repositioning itself as a key competitor in the smartphone industry, posing a significant challenge for Apple in one of its most important markets.
‘There is a danger that Apple becomes the imitator, not the trend setter’, says AJ Bell investment director Russ Mould. ‘It cannot afford to be in that position from a reputational perspective. Apple built its empire through innovation and being at the cutting edge of technology. It needs to work harder to stay on top.’
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