Editorial: Why Apple isn't 'slashing prices' in China

Posted:
in iPhone edited April 3
"Apple slashes prices in China" was the dramatic headline shared by outlets this week ranging from CNBC to VentureBeat. That's not actually true, so why is it being reported?


Like other firms in China, Apple passed a VAT drop to buyers. Media reports took a cynical turn.

The "slashing" that didn't slash

The reality is that Apple set new prices for its iPhones in China, featuring reductions of no more than 6 percent. The most popular iPhone XR, for example, was repriced 300 yuan (about $45) lower, just 4.6 percent less than it had been. The new prices pass along the benefit of lower Value Added Taxes set by China itself, which is seeking to reduce any friction that might be slowing down economic activity among its domestic consumers.

If you went to buy something that cost $1, and found it priced at 94 cents, you wouldn't get excited about the price being "slashed." It would actually be insulting to be told by the store that the price had been slashed.

While several reports sensationally insisted that the price "slashing" was made to correct "high pricing" that had resulted in lost sales in China to "competition," the single-digit percentage of change clearly has no effect on iPhones being significantly more expensive than China's domestic commodity phones.

Huawei sells smartphones with an Average Selling Price less than $250, so Apple's ASP of nearly $800 is not going to suddenly become price competitive with Huawei's average offerings after a $45 change.

Quite obviously, China didn't reduce Apple's taxes to cause pain for its domestic producers. The state itself knows that Apple has very limited real competition with commodity Android producers such as Huawei. China's affluent class uses iPhones, including Huawei's own executives, the company's brand ambassadors, and its public relations contractors-- even China's orchestrated propaganda campaigns against Apple were tweeted out by iPhone users. Apple's sales account for virtually all premium priced phones in the country. Globally, Apple sells the majority of all phones priced above $600.


China's affluent consumers use iPhones, including Huawei CFO Wanzhou Meng


Understanding what is actually happening with Apple's pricing in China requires unlearning a series of false media narratives than have clogged up reality over the past few years before reaching peak insanity over the last few months. The larger question is: are the tech reporters spinning these stories really that ignorant, or are they just flat out lying?

The iPhone pricing delusion

The idea that iPhone prices could be "slashed" is based on a delusional media fantasy is that Apple has priced its newest phones at obscene levels out of pure greed. It's particularly bizarre coming from people who also seem to think that Apple faces serious competition. You can't have stiff competition and, well, uncompetitive prices at the same time. That's pretty basic Econ 101, or even second grade lemonade stand, really.

These same pundits also love to demand that Apple "innovate," apparently without any understanding that the cost of forward thinking innovation is higher prices. Apple's innovation is exactly what is driving up its production costs. Those costs also force up retail costs to end users, but they deliver an exceptional product at those higher prices.

Today's iPhone XS is more than a commodity phone; it packs an advanced Intel modem, dual depth cameras, Samsung's best OLED display, and a series of other components that are expensive to produce. It's much more expensive than previous iPhones to build, something Apple refers to when talking about "higher cost structures."

Google's Pixel 3, Samsung's Galaxy S10, and other high-end phones have similar price tags. However, they are unsustainable to produce because they sell in much smaller volumes. Apple's latest and most expensive phone models account for the vast majority of the more than 200 million iPhones sold every year. If Apple were only selling around 30 million of its newest flagships like Samsung, or just a few million like Pixel, it would be in trouble and actually needing to slash its prices to induce demand to leverage economies of scale.

If Apple were merely selling yesterday's technology at lower prices to the majority of its customers, it would face the same problems as all of the Android makers that are doing just that. The ~$200 Average Selling Prices of Androids make it clear that every remaining phone maker is mostly selling lower and middle tier phones priced between $100 and $400, necessitating the recycling of older components and precluding the use of advanced technology like Apple's TrueDepth sensors and Application Processors in the class of its advanced A12 Bionic.

Samsung's Mobile IM phone group is literally going out of business, with plummeting revenues dropping by double digits. If Apple pursued the same strategies, it too would be losing money and shrinking its influence over the mobile market. Apple clearly isn't-- and shouldn't be-- following the "be Samsung" advice offered up by dead wrong analysts and the media that amplifies their foolish advice no matter how often its proven wrong.

Apple is not chasing low prices

Firstly, Apple is pretty obviously not even trying to compete with low-end device makers. If it were, it would be doubling down on low priced models like iPhone SE and iPhone 6, both of which can sell at much lower prices than Apple's newest models because they require far less expensive components.

Two years ago, Walmart was selling iPhone SE for $299, finally putting Apple's phones directly in competition with volume Android sales. But rather than launching some successful surge in iOS unit sales or inducing new expansions of a lower end product lineup, Apple has almost entirely discontinued these less expensive iPhone models outside of Refurbished clearance sales.


iPhone SE had fans, but never drove a large percentage of Apple's sales


It's pretty clear from everything we know about sales estimates and analytics on the installed base that lower priced iPhones are not Apple's sales drivers. Apple continues to mostly sell its best and most expensive models. There's no other phone maker than can say that.

Apple is not chasing low end markets

Apple also isn't moving its new iPhones down-market. Rather than introducing new ~$200 mid-range models like Samsung's Galaxy J, A and M series, Apple focused attention last year on its state of the art $999 iPhone X as a vision for the future.

It then introduced both higher and lower priced variants to sell this year, ranging from the $750 iPhone XR to its fully-loaded $1450 iPhone XS Max. All of those models would be considered "ultra premium" in the context of Androids, very few of which sell above $500.

Samsung and Huawei have shown off phones priced as high as $2,600, but those show-off models aren't even shipping nor are they intended to actually sell in volume. They're positioned to make it look like both companies are tech leaders, rather than just shippers of low priced commodity phones in increasing unit numbers.

After spending months insisting that iPhone X was too expensive to sell in any quantity, Bloomberg radically reversed its direction as it cheered on the introduction of expensive Androids in February, painting out the rising asking prices of Google, Samsung, Huawei (below) without ever pointing to any data showing that none of these are actually selling in volumes in any way comparable to Apple.


Bloomberg discussed rising prices without thinking about unit sales--because it was excited about Androids


Writing for Bloomberg, Mark Gurman even stated that "the move seems to have hurt Apple" in the quarter before those expensive folding phones were even released. Then to cover the logical bases, he returned to his cheap competition angle, stating that iPhone "sales stalled during the year, especially in China where competitors introduced phones with similar technology at sometimes a third or half the price."

That beggars belief, considering that Chinese producers didn't just start selling cheap Androids this year. Google promoted ultra cheap Nexus phones for a decade, and started promoting $99 phones under Android One back in 2014.

Why are cheap Android suddenly "hurting" Apple's sales after accomplishing nothing for the last decade? They're not. It's just that the people who didn't understand iPhone X last year still have no understanding of the market, or are writing things they know are false in a bid to influence the market. Sure doesn't seem effective, in view of the success of iPhone X and its successors.

It's Samsung, not Apple, getting slammed in China by cheap Androids

While Bloomberg worked hard to play up the idea that China's cheap Androids "seem to have hurt Apple", the real company suffering from cheap Androids is Samsung-- along with all of the Chinese producers of cheap Androids that are going out of business. Notably, Bloomberg didn't even mention that Samsung's phone unit was losing money and seeing its global revenues plummet by 20 percent, even while playing up the story of Apple's 4 percent decrease in global revenues last quarter as a dramatic, newsworthy crisis.

Samsung has articulated to both investors and the media that its Galaxy J, A, M and other mid-tier brands are indeed a rather desperate effort to chase lost sales in China-- where it was formerly the top selling Android maker-- and in developing markets including India where domestic and Chinese makers are giving it tough competition in unit sales.

This isn't a new strategy. Samsung launched the cheap Galaxy J back in 2015, and has continued to expand its low and middle tier phone models (typically in the $100-400 price range), making them the focus of its offerings. They're certainly the focus of its volume sales.

Samsung's high priced Galaxy S models, which are priced like iPhones, are not selling well. But despite operating in the very same markets globally, Apple doesn't have Samsung's problems nor is it pursuing the same pricing strategies.

Tech media figures like to talk about Apple's drop in Chinese iPhone sales last quarter as if it were specific to Apple or limited to smartphones, but like Bloomberg, they haven't been talking so much about what was causing Samsung's crash in premium sales that's destabilizing its entire phone business. In fact, they're often trying to spin Samsung's problems as not really an issue.


The URL, page title and headline indicate increasingly strident efforts to tone down this story about Samsung's performance

Why should Apple do what Samsung has been doing if that isn't working?

Apple's unit sales reporting, once provided with regional market detail, was harvested by analysts to create false and misleading reports that insisted that Apple would get pushed out of the phone business if it did not rush to market a $300 iPhone. These analysts were clownishly wrong.

"It's time for a mid-range iPhone," Deutsche Bank analyst Chris Whitmore once announced to investors, outlining his ideas for a $350 unlocked device. That was back in 2011.

It would be hard to set up a more purely scientific test of two pricing strategies in a given market than the reality of Apple and Samsung duking it out in China over the last few years. Even after being hit by a huge economic downturn in China over the holiday quarter, Apple's overall global revenues were barely blunted. It presented its second best holiday quarter ever: $84.3 billion in revenues. Following its low priced Android strategy, Samsung's sales in China have been devastated-- not just in the last quarter of trade warring, but for years now. It's losing money globally.

Apple is not only still selling iPhones profitably, but is also seeing growth in sales of Macs, iPads and other hardware and services in China, while Samsung is a smoldering ruin of its once prominent position. It has no enthusiastic installed base seeking to buy App Store titles or music streaming, or to interest in a new Arcade subscription.

Given the results of this experiment, how stupid would you have to be to keep insisting that Apple now do what Samsung did in China?

The most successful things Apple has done involve investing to innovate its way out of a stagnating market. Just as smartphones were turning into generic slabs of glass that all featured similar cameras, Apple differentiated its fanciest phone with depth photography, flattering Portrait capture, convenient Face ID, Augmented Reality games, and playful Animoji, rekindling interest in having the newest, not the cheapest, iPhone. That worked. Even Bloomberg had to admit that, even if it decided to return to promoting its personal theories about how Apple's iPhone sales were somehow shifting to Huawei without resulting in any real shift in ASP.


iPhone X was a radical, mass market leap, not just a price increase


Who profited from the 6-10 million iPhone upgrades Apple failed to sell as expected in China last quarter? It sure wasn't Huawei, which reported a ten percent operating margin, a severe retraction in cash flow, and profit growth that lagged behind its revenue growth in its annual report. There was no windfall of billions from disgruntled Chinese consumers flocking to Android.

False reporting on Apples sales in China

While Apple's prices are higher than its competition, the reason isn't simply "padded profits" on Apple's end. Apple's production costs have never been higher. Innovation is expensive.

Apple would love to be able to make the profits it was making on iPhones and iPads back before it was forced to innovate into its present day cost structures. Back then, the Average Selling Prices of both were also lower. So clearly, if Apple could reduce prices to boost sales at similar profits, it would in a heartbeat.

In fact, rather than cartoonishly setting painful product prices at the malicious whim of its laughing executives, many of Apple's most difficult pricing issues are out of its control. It works to manage the price of components and hedge against shifts in currency exchange, but it can only do so much.

When the United States embarked upon a trade war with China last year, Apple sought to calm things down to protect its own interests. Radical shifts in tariffs, economic output, and currency valuations result in higher prices for consumers and can cause buyers to delay purchases out of an uncertainty of the future.

After China veered out of control in the December quarter, Apple's chief executive Tim Cook provided a post mortem on the situation, explaining that buyers in China were delaying upgrades in large part due to unfavorable exchange rates, explicitly citing "US dollar strength-related price increases" as a primary cause.

This wasn't news to AppleInsider readers, as we've been discussing the impact of currency fluctuations on Apple's profits, pricing and demand for many years. But that reality was mocked and then flatly misconstrued by the same Bloomberg writer trying to shore up his false, naive fantasies about how product pricing works-- a year after being proven wrong about how consumers would react to a $999 phone.

Hot on the heels of printing a wholly unsubstantiated report that imagined China had installed snooping chips on Apple's servers-- and after earlier publishing that extended campaign belligerently insisting that iPhone X would be a flop because of its pricing-- Bloomberg contorted Cook's statements to suggest that the company was again being humbled and embarrassed by superior Chinese producers able to ship cheaper copies of Apple's work.

We know Bloomberg falsely reported this intentionally because the site published the story both ways. On January 3, it chided Cook for providing "a number of factors [that] contributed to the revised outlook for the holiday period," while specifically complaining that he "didn't mention that Apple had priced its new models at stratospheric levels."

But two weeks later, the same writer stated that Apple itself had-- via Cook's same statement-- admitted that its "higher prices" were to blame for lower than expected iPhone upgrades.

Bloomberg Apple reporting
In two weeks, Bloomberg went from claiming that Apple's letter to investors had refused to acknowledge the impact of iPhone pricing on demand to stating that it cited "higher prices" as a primary reason for lower than expected sales.


Imagine being a legitimate journalist and losing one's job-- as so many recently have-- and then observing Bloomberg staff writers having the job security to print complete balderdash, feature made up fantasies as inside reports, and even cite false quotes to forward fake narratives. Must be frustrating!

And imagine working to develop and then mass produce complex products as affordably as possible, only to be arrogantly criticized by bloggers with zero experience in the industry for not simply lopping hundreds of dollars off your price because they said you should.

A two sided sword-standard of price slashing

It's not a simple matter of ignorance to portray Apple's latest price adjustment as a "slashing." It's an effort to misinform the public. That same effect was on parade when the same Bloomberg writer referred to Apple's trade in program as a "price slashing."

The commonality of describing a 4 to 6 percent price adjustment by Apple as "price slashing" is particularly noteworthy because the same sort of rhetoric is not being used to describe actual events involving radical price "slashing" elsewhere in the industry.

Notably, Google cutting $300 off the price of its Pixel 2 phone last year with "no trade-in required" wasn't portrayed as a cause of concern by Bloomberg as it offered up disproportionate, informercial-like coverage of Google's Pixel products, nor was it bothered by the ineffectiveness of those price slashing Google ads to actually sell Pixel devices.

More recently, the Wall Street Journal just reported that Amazon has announced plans to again cut prices of a range of products at its Whole Foods subsidiary by about 20 percent, expressly to ditch the store's reputation as pricy and to induce sales in a competitive environment. Even that wasn't reported as "slashing prices."

So why make up a fake story about Apple's business in China?
watto_cobra
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Comments

  • Reply 1 of 35
    LatkoLatko Posts: 386member
    So slashing prices a certain percentage wouldn’t enhance sales, but bad exchange rates had impact. It’s a strange, Cookette world...
    edited April 3 Carnagemuthuk_vanalingamasdasd
  • Reply 2 of 35
    FatmanFatman Posts: 291member
    State subsidies is why Chinese handset manufacturers can sell similar (or better ) spec’d phones at one third the price. In a non-communist society, these companies would be bankrupt if they did not have that support. The China 2025 strategy is to own the world’s top technology and to never again depend on any other nation. They are using the same strategy in the data center, electric cars, telecom and airlines. They are willing to take massive losses in the short term to destroy the competition. There will be no other choices left (and innovation will die along with it). Manufacturing has already disappeared in many countries. Intellectual property has already been stolen - with no penalty. How can Apple or any other company or nation compete with that? The only edge Europe and America has over China is their ability to be truly creative and innovative, traits nearly impossible to steal or replicate - but is that enough?
    mef475correctionsracerhomie3applesnorangesronnwatto_cobrajony0
  • Reply 3 of 35
    LatkoLatko Posts: 386member
    Fatman said:
    State subsidies is why Chinese handset manufacturers can sell similar (or better ) spec’d phones at one third the price. In a non-communist society, these companies would be bankrupt if they did not have that support. The China 2025 strategy is to own the world’s top technology and to never again depend on any other nation. They are using the same strategy in the data center, electric cars, telecom and airlines. They are willing to take massive losses in the short term to destroy the competition. There will be no other choices left (and innovation will die along with it). Manufacturing has already disappeared in many countries. Intellectual property has already been stolen - with no penalty. How can Apple or any other company or nation compete with that? The only edge Europe and America has over China is their ability to be truly creative and innovative, traits nearly impossible to steal or replicate - but is that enough?
    Those practices are indeed detesting. However, with Apple’s gross margins, its huge cost infrastructure (luxurious offices, real estate etc.), its accumulated wealth that is larger than some continents and biggest corp. cash reserve on the planet, go figure what their net earnings are versus the competition. Were it that it re-directed those funds into premier innovation, that would be understandable and from a customer POV make sense. However, we sadly have to conclude that it lamented its position and the Chinese/Taiwanese/Korean wouldn’t even need subsidies to undercut it’s prices to prove they are outrageous. That said, Chinese state subsidization as you describe worsens the situation and is just as alarming (or possiblyeven more, if you could somehow quantify it...) However, using it as spin (like Cook does) is elementary nonsense when it comes to Apple’s inflated proposition (that started with the Mac, and now getting into iPhone/iPad) Note: Apple isn’t that far from cross-subsidization itself: Apple Music, as per Jimmy Iovine’s grievance, can’t exist on its own and depends on heavy corp. subsidization in its effort to destroy Spotify.
    edited April 3 muthuk_vanalingam
  • Reply 4 of 35
    knowitallknowitall Posts: 1,329member
    As I indicated in earlier posts the iPhones are about twice as expensive as they should be (including a healthy profit margin).
    It’s completely evident that Apple asks way to much for its products, just look at the billions of profit every month (that it burns away to even further insult its buyers).
    Latko
  • Reply 5 of 35
    avon b7avon b7 Posts: 3,796member
    "The state itself knows that Apple has very limited real competition with commodity Android  such as Huawei. China's affluent class uses iPhones, including Huawei's own executives, the company's brand ambassadors, and its public relations contractors-- even China's orchestrated propaganda campaigns against Apple were tweeted out by iPhone users. Apple's sales account for virtually all premium priced phones in the country. Globally, Apple sells the majority of all phones priced above $600"

    Reuters reported the opposite to what is implied here regarding premium competition in China:

    "Chinese smartphone firms jazz up products, seize turf in home market from Apple"


    https://www.reuters.com/article/us-china-tech-smartphones-analysis/chinese-smartphone-firms-jazz-up-products-seize-turf-in-home-market-from-apple-idUSKCN1R30CS

    While Apple may sell the majority of phones over $600 it seems clear that that band is being eaten into by competitors. That is the real story here.

    It is also clear why Chinese users have chosen more non iPhone ultra premium phones than ever: Those phones are simply considered to be better.

    Since 2017, and in spite of increasing prices, every single Huawei flagship model has broken sales records with regards to its predecessor. The P30 Pro isn't even two weeks old and pre-orders are already smashing those of the P20 Pro.

    And while Ms Meng may have an iPhone (an old one at that) she also has a 2,000€ Huawei Mate RS. Which do you think is her day to day phone?

    As for executives, all recent appearances have seen them using Mate X models.




    edited April 3 muthuk_vanalingam
  • Reply 6 of 35
    Johan42Johan42 Posts: 163member
    knowitall said:
    As I indicated in earlier posts the iPhones are about twice as expensive as they should be (including a healthy profit margin).
    It’s completely evident that Apple asks way to much for its products, just look at the billions of profit every month (that it burns away to even further insult its buyers).
    Who else will pay for their exorbitant luxury if their customers don’t?
  • Reply 7 of 35
    frantisekfrantisek Posts: 470member
    I have not read that loooong article. But Apple have to slash prices hard to have effect on sale. 50-100 USD reduction wont persuade Android user to switch. Would already did it.
    edited April 3
  • Reply 8 of 35
    LatkoLatko Posts: 386member
    One of the KEY problems apart from prices, is that Apple’s ecosystem does not get valued in China. On the contrary, much of that ecosystem breathes typical US-based culture, habits and usage patterns, that do not align with the Far-East. I don’t feel the latest Keynote (and in particular, Tim’s hug with Oprah...) has changed that for the better
    edited April 3 knowitall
  • Reply 9 of 35
    correctionscorrections Posts: 1,347member
    avon b7 said:
    "The state itself knows that Apple has very limited real competition with commodity Android  such as Huawei. China's affluent class uses iPhones, including Huawei's own executives, the company's brand ambassadors, and its public relations contractors-- even China's orchestrated propaganda campaigns against Apple were tweeted out by iPhone users. Apple's sales account for virtually all premium priced phones in the country. Globally, Apple sells the majority of all phones priced above $600"

    Reuters reported the opposite to what is implied here regarding premium competition in China:

    "Chinese smartphone firms jazz up products, seize turf in home market from Apple"


    https://www.reuters.com/article/us-china-tech-smartphones-analysis/chinese-smartphone-firms-jazz-up-products-seize-turf-in-home-market-from-apple-idUSKCN1R30CS

    While Apple may sell the majority of phones over $600 it seems clear that that band is being eaten into by competitors. That is the real story here.

    It is also clear why Chinese users have chosen more non iPhone ultra premium phones than ever: Those phones are simply considered to be better.

    Since 2017, and in spite of increasing prices, every single Huawei flagship model has broken sales records with regards to its predecessor. The P30 Pro isn't even two weeks old and pre-orders are already smashing those of the P20 Pro.

    And while Ms Meng may have an iPhone (an old one at that) she also has a 2,000€ Huawei Mate RS. Which do you think is her day to day phone?

    As for executives, all recent appearances have seen them using Mate X models.

    Yes, I wonder if Ms Meng is using the shiny Android or the iPhone that works with her iPad and the MacBook she carries on her person everywhere, including her international flights. That's really tough to figure out. 

    And breaking sales records isn't hard when you have no history of selling any significant number of premium phone sales. This Reuters "report" is pure corporate PR-BS fed directly from Huawei. 

    Last summer, Huawei said its P20 flagship series sales (including ~$240 models) were up by 81% over P10 (!) hitting... 6 million in a quarter. That's barely more than a couple years of Pixel, or on par with a Samsung launch. Note that Samsung's Galaxy S sales have crashed more than that.  

    Shame on you for trying to make us stupider rushing to forward some fact-free propaganda.  
    racerhomie3nhtwatto_cobrajony0
  • Reply 10 of 35
    correctionscorrections Posts: 1,347member

    knowitall said:
    As I indicated in earlier posts the iPhones are about twice as expensive as they should be (including a healthy profit margin).
    It’s completely evident that Apple asks way to much for its products, just look at the billions of profit every month (that it burns away to even further insult its buyers).
    Got any facts to back up your personal theories? I didn't think so.  
    racerhomie3watto_cobrajony0
  • Reply 11 of 35
    correctionscorrections Posts: 1,347member

    Latko said:
    So slashing prices a certain percentage wouldn’t enhance sales, but bad exchange rates had impact. It’s a strange, Cookette world...
    Any difference in price has some effect. 

    4-6% is not a "slashing."

    China's VAT reduction was expressly intended to boost economic activity, as noted in the article.

    Overall improvements in China's economic situation will have a positive affect on delayed iPhone sales. 

    Currency exchange affects the price users see, and also affects the profits Apple reports in USD. 
    racerhomie3watto_cobra
  • Reply 12 of 35
    carnegiecarnegie Posts: 725member
    knowitall said:
    As I indicated in earlier posts the iPhones are about twice as expensive as they should be (including a healthy profit margin).
    It’s completely evident that Apple asks way to much for its products, just look at the billions of profit every month (that it burns away to even further insult its buyers).
    Do you think that Apple could sell iPhones for half of what it does and still make a healthy profit?

    If so, that isn't right. If Apple's iPhone ASP had been half of what it was in the December quarter, and if nothing else changed, not only would Apple have lost money on iPhone sales but the loses from iPhone sales would have been enough to consume all the profit it made from other products and services. It would have lost a couple billion dollars during the quarter. And that's without it selling any additional iPhones as a result of the lower prices. With additional iPhone sales, it likely would have lost even more money (with the amount depending on the distribution of those sales).

    That said, considering that the iPhone is still arguably the most successful consumer product in the world, it would seem that the market doesn't think iPhones are overpriced. I'd say that it's completely evident that Apple doesn't ask way too much for its products.
    racerhomie3correctionsthtPickUrPoisonwatto_cobrajony0
  • Reply 13 of 35
    knowitallknowitall Posts: 1,329member
    Latko said:
    One of the KEY problems apart from prices, is that Apple’s ecosystem does not get valued in China. On the contrary, much of that ecosystem breathes typical US-based culture, habits and usage patterns, that do not align with the Far-East. I don’t feel the latest Keynote (and in particular, Tim’s hug with Oprah...) has changed that for the better
    EU-based culture is also a bad fit at the moment.
  • Reply 14 of 35
    knowitallknowitall Posts: 1,329member
    Johan42 said:
    knowitall said:
    As I indicated in earlier posts the iPhones are about twice as expensive as they should be (including a healthy profit margin).
    It’s completely evident that Apple asks way to much for its products, just look at the billions of profit every month (that it burns away to even further insult its buyers).
    Who else will pay for their exorbitant luxury if their customers don’t?
    I don't know about that, engineers (the people doing the actual work) working for Apple do not get exorbitant salaries as far as I know.
  • Reply 15 of 35
    wandersowanderso Posts: 97member
    While the focus of this article is specific to iPhone pricing in China, I believe that Apple needs to revive an entry level iPhone in their lineup that isn’t simply continuing to produce last year’s model at a lower price.   Much of the internals can still be from the old phone, but having something that is new to this less expensive phone brings appeal to budget conscious buyers.  I realize that the XR could be said to fulfill that, but it still isn’t quite at the right price point for what I am meaning.  

    Why do this?  Apple is attempting a further shift towards services.  There is a hardware $$ barrier of entry to these services set by the prices for Apple premium products.  By having “budget friendly” options, the potential base for these services greatly expands.  One may argue that budget conscious buyers may be less apt to buy these services, but people on tighter budgets seem to always find a means to pay for entertainment options (for example) at the level that they can afford.  If Apple services were strong enough from a product sales mix perspective, they could sell the phones at much lower margins and make up the difference (and more!) through this strategy.   Apple’s huge cash horde allows them to consider to enter a market with deeper investments than virtually all of their competitors. Sometimes these investments come in the form of less margin.  
    If Apple does not do this, their services uptick will not reach the dominance that they could. 
    DAalseth
  • Reply 16 of 35
    racerhomie3racerhomie3 Posts: 1,106member
    Latko said:
    So slashing prices a certain percentage wouldn’t enhance sales, but bad exchange rates had impact. It’s a strange, Cookette world...
    5% discount will not enhance sales much. But in poorer regions (China & India,Bangladesh) bad exchange rate had increased prices by upto 15%. Apple has started to absorb that 15% .
    watto_cobra
  • Reply 17 of 35
    correctionscorrections Posts: 1,347member
    wanderso said:
    While the focus of this article is specific to iPhone pricing in China, I believe that Apple needs to revive an entry level iPhone in their lineup that isn’t simply continuing to produce last year’s model at a lower price.   Much of the internals can still be from the old phone, but having something that is new to this less expensive phone brings appeal to budget conscious buyers.  I realize that the XR could be said to fulfill that, but it still isn’t quite at the right price point for what I am meaning.  

    Why do this?  Apple is attempting a further shift towards services.  There is a hardware $$ barrier of entry to these services set by the prices for Apple premium products.  By having “budget friendly” options, the potential base for these services greatly expands.  One may argue that budget conscious buyers may be less apt to buy these services, but people on tighter budgets seem to always find a means to pay for entertainment options (for example) at the level that they can afford.  If Apple services were strong enough from a product sales mix perspective, they could sell the phones at much lower margins and make up the difference (and more!) through this strategy.   Apple’s huge cash horde allows them to consider to enter a market with deeper investments than virtually all of their competitors. Sometimes these investments come in the form of less margin.  
    If Apple does not do this, their services uptick will not reach the dominance that they could. 
    How cheap does hardware have to get to reach people who will actually pay for these services? People buying $400 phones aren't paying for top tier services. They are stealing movies.

    Samsung couldn't sell Milk music to its $200 ASP audience of smartphone buyers. Why do you suppose? 

    Google can't sell half the apps to its Play audience despite having twice the volume of people.

    Subsidizing hardware sometimes makes sense: Xbox and Playstation were always sold at or below cost, but they made it up in licensing $80 games. How will Apple break even on phones and make enough to replace that with services? It won't. Much smarter to be an Apple than to be a Samsung, which is pretty much exactly what you're saying Apple "needs" to be to gain critical mass. Does not appear to be true.  
    watto_cobra
  • Reply 18 of 35
    Haters gotta hate.
    watto_cobra
  • Reply 19 of 35
    knowitallknowitall Posts: 1,329member

    knowitall said:
    As I indicated in earlier posts the iPhones are about twice as expensive as they should be (including a healthy profit margin).
    It’s completely evident that Apple asks way to much for its products, just look at the billions of profit every month (that it burns away to even further insult its buyers).
    Got any facts to back up your personal theories? I didn't think so.  
    Actually, yes, see my previous posting about the value of an iPhone. Real profit is also a fact, unless Apple had its own info wrong.
  • Reply 20 of 35
    avon b7avon b7 Posts: 3,796member
    avon b7 said:
    "The state itself knows that Apple has very limited real competition with commodity Android  such as Huawei. China's affluent class uses iPhones, including Huawei's own executives, the company's brand ambassadors, and its public relations contractors-- even China's orchestrated propaganda campaigns against Apple were tweeted out by iPhone users. Apple's sales account for virtually all premium priced phones in the country. Globally, Apple sells the majority of all phones priced above $600"

    Reuters reported the opposite to what is implied here regarding premium competition in China:

    "Chinese smartphone firms jazz up products, seize turf in home market from Apple"


    https://www.reuters.com/article/us-china-tech-smartphones-analysis/chinese-smartphone-firms-jazz-up-products-seize-turf-in-home-market-from-apple-idUSKCN1R30CS

    While Apple may sell the majority of phones over $600 it seems clear that that band is being eaten into by competitors. That is the real story here.

    It is also clear why Chinese users have chosen more non iPhone ultra premium phones than ever: Those phones are simply considered to be better.

    Since 2017, and in spite of increasing prices, every single Huawei flagship model has broken sales records with regards to its predecessor. The P30 Pro isn't even two weeks old and pre-orders are already smashing those of the P20 Pro.

    And while Ms Meng may have an iPhone (an old one at that) she also has a 2,000€ Huawei Mate RS. Which do you think is her day to day phone?

    As for executives, all recent appearances have seen them using Mate X models.

    Yes, I wonder if Ms Meng is using the shiny Android or the iPhone that works with her iPad and the MacBook she carries on her person everywhere, including her international flights. That's really tough to figure out. 

    And breaking sales records isn't hard when you have no history of selling any significant number of premium phone sales. This Reuters "report" is pure corporate PR-BS fed directly from Huawei. 

    Last summer, Huawei said its P20 flagship series sales (including ~$240 models) were up by 81% over P10 (!) hitting... 6 million in a quarter. That's barely more than a couple years of Pixel, or on par with a Samsung launch. Note that Samsung's Galaxy S sales have crashed more than that.  

    Shame on you for trying to make us stupider rushing to forward some fact-free propaganda.  
    "Fact free propaganda"?

    Wrong on both counts.

    So, in spite of Reuters citing all the information given, you bin it as "PR BS direct from Huawei". On what grounds?

    What is more, they were citing, among others,  both Counterpoint and Canalys, both of whom are used as sources in numerous AI pieces during the year.

    And as for facts, I will correct you:

    https://www.phonearena.com/news/Huawei-P20-sales-numbers_id105758

    "UPDATE: Huawei has clarified to us that the number does not include sales of the Huawei P20 Lite. Instead, it solely represents sales of the two flagship models and can be considered an even more impressive achievement."

    This means that number does NOT include ~$240 phones. In fact, Huawei shipped 10,000,000 P20 flagships in five months:

    https://consumer.huawei.com/en/press/news/2018/Huawei-celebrates-10-million-huawei-p20-pro-and-p20-units-sold-globally/

    Far from being fact free, nothing I wrote was even remotely in that line.

    In spite of your attempts, what I wrote stands on its own two legs.

    Meng was carrying a Mate RS. The entire Huawei board has been seen carrying Mate X models.

    If Apple is seeing an iPhone slowdown in China, Huawei is very much one of the reasons. This is beyond doubt at this stage even if you (and basically only you) refuse to see it. The numbers are speaking for themselves and Huawei  still shows no signs of letting up (and there are indications of Honor once again getting aggressive on pricing in the mid range bands this year).





    muthuk_vanalingam
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