Apple cuts the prices of its devices in China, but not for the reason you think

Apple cuts the prices of its devices in China, but not for the reason you think
Earlier this year, there were quite a few reasons why Apple decided to cut the wholesale price of the 2018 iPhone models in China. First, the strength of the U.S. Dollar against the Chinese Yuan forced Apple to price the 'more affordable' iPhone XR higher than the premium-priced Huawei Mate 20 Pro in China. When the dollar is stronger against the Yuan, it means that Apple gets fewer dollars back when it converts the Yuans it receives from sales of its products in China. At this point, Apple has a choice; it can keep pricing the same and suffer the consequences, or it can lower its prices in China and take a hit to its margins.

In addition, a rise of Chinese nationalism hurt iPhone sales as consumers in the country protested the U.S.-China trade war and the U.S. government's treatment of Huawei. There was the overall sluggishness in the smartphone market due to high prices, lack of innovation and high penetration rates for smartphones. Lower sales in China of iPhone models forced Apple to cut its revenue guidance for the fiscal first quarter, leading to a selloff in the company's stock. At the time, Apple CEO Tim Cook said, "If you look at our results, our shortfall is over 100 percent from iPhone and it's primarily in greater China." As it turned out, Apple ended up shipping 20% fewer iPhone units to China during the three month period, and its overall revenue in the market declined by 28% or $5 billion.

Caixin reports today (via CNBC) that Apple has made another bold pricing move in China, this time slashing prices of certain devices in the company's own online and physical stores by as much as 6%. The affected products include iPhones, iPads, AirPods and Macs. For example, in China's version of the Apple Store, the 64GB iPhone XR is now priced at 6,199 Yuan (equivalent to $924 USD at current exchange rates), a 4.6% decline from the 6,499 Yuan that the phone was listed at just a few days ago. The price cut took 500 Yuan ($74.50 USD) off the prices of the iPhone XS and iPhone XS Max.

This is why Apple cut its prices in China today


However, unlike the previous price cut in China, this time the reason has nothing to do with the supply-demand balance. Starting today, new regulations dropped the value-added tax (VAT) for manufacturers in China to 13% from 16%. This gives Apple some leeway to lower the pricing of Apple devices in the country. Still, consumers in China often find better pricing for the company's products online. Prices for the iPhone XS Max and iPhone XS declined by as much as 2,000 Yuan ($298 USD) last month on these sites due to tepid sales of the phones. E-commerce firms in China such as Tmall and JD.com have now cut their prices on the 2018 iPhone models twice this year.

It wasn't until 2009 that a Chinese wireless provider offered the Apple iPhone to consumers. Before the iPhone 3GS became available from China Unicom, iPhone models could only be purchased from the black market.

Investors have decided to ignore this news. Currently, shares of Apple are up .18% at $190.30.

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13 Comments

1. IT-Engineer

Posts: 523; Member since: Feb 26, 2015

Come now, just say it instead of giving excuses and telling people, it's not what you think! Say it, apple is taking a hit with their sales so they are forced to lower their prices... See it wasn't that hard!

3. sgodsell

Posts: 6895; Member since: Mar 16, 2013

Its not only price, but most Chinese are not tied down, or locked into Apple's ecosystem. That and a 28% decrease in the purchases of iPhones. Means Apple has to take drastic measures to entice users to purchase more of their products. Besides Apple is trying to get into more services. Even though most of their services are locked into Apple's platforms.

4. sgodsell

Posts: 6895; Member since: Mar 16, 2013

The other thing is in China their is so many smartphone choices for the people over their, and all those other choices are lower in price, especially compared to Apple's offerings.

5. IT-Engineer

Posts: 523; Member since: Feb 26, 2015

I don't disagree with you, I just think it's getting disgusting that authors try to give an excuse by misleading titles and articles.

2. CreeDiddy

Posts: 2128; Member since: Nov 04, 2011

Apple should just lower the prices of the 2019 models. Price should start for XR2 at $599, XI $699, XI Max $799. Talk about smashing their numbers. Wishful thinking, but if I’m Apple I would do this as it will be an “S” year. X, 8, XS owners are willing to wait it out another year. That’s the problem when the product is so good.

6. Leo_MC

Posts: 6710; Member since: Dec 02, 2011

If you know how to do an iPhone that costs so little, why don't you go to an investor and create a new Apple? You'll be making hundreds of billions.

7. IT-Engineer

Posts: 523; Member since: Feb 26, 2015

There are a lot better phones that are cheaper with better build and better looks, take the Mate 20 Pro for one!

9. Leo_MC

Posts: 6710; Member since: Dec 02, 2011

Yes, they are [for you], so use those.

8. mootu

Posts: 1421; Member since: Mar 16, 2017

CreeDiddy actually has a point, they would sell far more devices which would equalize lower profits per device. But they would gain more users which would lead to higher numbers using the subscription services which is the most profitable part of the business. Apples biggest problem is that they have commited to being a so called "luxury" brand and will not sell at lower prices under any circumstances.

10. Leo_MC

Posts: 6710; Member since: Dec 02, 2011

That's wishful thinking. Apple ecosystem is built for a number of users; more users means higher costs; lowering the prices means poorer people or people that are less willing to spend money for services, which means the profitability could drop significantly. I would drop Apple like a bad tooth, if iMessage would start working like whatsapp, if they would push me ads inside the email or if I would have to wait a month for a software update (I started to see ads on the App Store and I told them I'm not OK with that).

11. IT-Engineer

Posts: 523; Member since: Feb 26, 2015

That's wishful thinking. Apple ecosystem is built for a number of users; more users means higher costs; This there shows you know nothing about business, let alone software engineering.

12. Leo_MC

Posts: 6710; Member since: Dec 02, 2011

You're funny. My servers are perfectly scaled for a number of users; any more I would have to double my investment and the return of value - for my services - makes it a bad investment (for the moment). I will adjust my business model, but I will do it for a certain number of users and a certain cost/user.

13. IT-Engineer

Posts: 523; Member since: Feb 26, 2015

Double your investment if you want to scale more? Where did you copy and paste this bs? I'm gonna pretend you didn't copy and paste that, is it Azure or Amazon? You do know you pay for the amount of calculation your server is using, and when idle you won't pay other than your standard fee! So adjusting your business to model won't help if your model is crap from the beginning. Please do a little more research before copying and pasting.

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