Apple priced the iPhone out of the Chinese smartphone market

“Apple Inc.’s falloff in demand for iPhones in China shows the company’s flagship product is hurt by its high price and the rise of cheaper, more comparable rival devices in the world’s biggest market,” Ian King and Mark Gurman write for Bloomberg. “The company cited struggling iPhone sales in China when it cut its quarterly revenue forecast on Wednesday for the first time in almost two decades. Chief Executive Officer Tim Cook said a number of factors contributed to the revised outlook for the holiday period, including the strength of the dollar, fewer subsidies from phone service providers and existing customers sticking with older models via cheaper battery replacements. He didn’t mention that Apple had priced its new models at stratospheric levels.”

“The iPhone XS Max, the current top of the iPhone range, starts at 9,599 yuan ($1,400) in China. Flagship phones from Huawei Technologies Co. and Oppo cost from 4,000 to 5,000 yuan, around half that of an iPhone. Some of Vivo’s entry level smartphones cost a quarter of the price,” King and Gurman write. “Even Apple’s iPhone XR, which was supposed to be a lower-cost alternative to the high-end iPhones, costs about 1,000 yuan more than a competing device.”

Apple's all-new 5.8-inch iPhone Xs starting at $999 and 6.5-inch iPhone Xs Max starting at $1099
Apple’s all-new 5.8-inch iPhone Xs starting at $999 and 6.5-inch iPhone Xs Max starting at $1099

 
“The average monthly white-collar salary in China was 7,850 yuan in the third quarter of 2018, meaning that most new iPhones cost more than a month of work,” King and Gurman write. “Apple has recognized its pricing in China may be too high, expanding a recent iPhone trade-in promotion from the U.S. to the region at the end of December.”

Read more in the full article here.

MacDailyNews Take: Apple pushed the pricing elasticity to see how far they could go and the elastic broke. That’s good news for iPhone consumers the world over. The next generation of iPhones will cost less and do more. (Hopefully, they’ll be better named as well.)

SEE ALSO:
Apple launches trade-in program in China to get Android users to upgrade to iPhones – January 3, 2019

11 Comments

  1. I think putting all the Apple eggs in one basket, the iPhone basket, is biting Apple on the rear now. Unless Apple changes its focus it could end up been the next Nokia.
    https://www.cultofmac.com/598782/goldman-sachs-thinks-apple-could-be-the-next-nokia/

    Also, Apples hubris is killing it.
    No new Mac Pro.
    Killing Airport products.
    Killing Aperture (miles better than Lightroom at the time).
    Pricing its products out of reach of most people. Spec’d out iMac Pro anybody?
    Updating FCX to Final Cut Pro and forgetting about the existing user base.
    Thinner is better for MacBooks at the expense of ports.
    Etc…

    Apple was a great company and I hope it will be again. In fact I am writing this on a 10 year old Mac Pro which has been upgraded because the current (6 year old) Mac Pro does not suit my needs. So please Apple focus on revenue streams other than the iPhone.

    1. Your point about lack of new Mac products and having revenue strongly weighted to iPhones are valid.
      Whether that would make a significant difference in revenue is in question. With an average ASP of $1500, Apple would need to sell an additional 100K units for bring in $1.5B revenue. It is easier for them to sell 200K iPhone units for the same amount.
      I think Apple needs to put more effort on non-iPhone products and refreshing Macs more frequently is key to that. Whilst the Mac Pro does not garner last sales volume, having a simpler design which allows for regular updates is straightforward. A mid size tower that is not a big as the old Pro but has space for drives and cards is a no brainer. This would suit the needs for the power user plus the enthusiast who wants more than an iMac or Mac mini.

    1. No amount of price reduction would have made any difference in China.

      “The Chinese consumer, a previously reliable driver of economic growth, is under stress, threatening to deepen a broad slowdown in China’s economy that is rattling global markets.

      Consumers have pulled back spending, their confidence dented by a shaky domestic economy, and a trade fight with the US”

      https://www.wsj.com/articles/chinese-consumers-curb-spending-likely-deepening-slowdown-11546526257

      1. Yes, but it did not happen just this quarter. Apple essentially priced out of them. But it gave Cook & Co. an opportune excuse. Well, this is the Co. that counted the battery replacement as one of them (blaming us). Say something about the pricing and other failures of their own, and things become a bit more credible. But a nice try, Tim…

  2. Just to throw another monkey’s wrench into the China situation;

    “Larry Kudlow, financial analyst and economic advisor to the Donald Trump administration as head of the National Economic Council, today said that ‘Apple technology may have been picked off by China’ (via CNBC).

    Although he qualifies his statements with no assertions of surety, Kudlow indicates that Apple trade secrets may have been stolen to help China’s domestic smartphone manufacturers catch up.”

    https://9to5mac.com/2019/01/04/trump-economic-advisor-says-china-may-have-stolen-apple-technology/

  3. Well, CNBC last night was saying that the macroeconomy (China etc) 30% and Apple specific 70% are responsible for Apple’s failure. A fair and professional assessment.

  4. Is it price? Or form factor? Wasn’t the SE supposed to be the preferred iPhone for the Asian market? No update for the SE with all the fancy bells and whistles …

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