Apple cuts the prices of its devices in China
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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 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.
“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.
Questions & Answers
Q.What devices have had their prices cut recently in China?
What devices have had their prices cut recently in China?
Apple has recently slashed the prices of iPhones, iPads, AirPods, and Macs in its online and physical stores in China.
Q.What is the main reason for Apple's latest price reduction in China?
What is the main reason for Apple's latest price reduction in China?
The primary reason for this new price cut is that new regulations have lowered the value-added tax for manufacturers in China from 16% to 13%.
Q.What factors led to Apple's previous price cuts and revenue shortfall in China?
What factors led to Apple's previous price cuts and revenue shortfall in China?
Previous price cuts were influenced by a strong U.S. Dollar, a rise in Chinese nationalism, sluggish smartphone market, and lower iPhone sales in China.
Q.How did the 64GB iPhone XR's price change in China's Apple Store?
How did the 64GB iPhone XR's price change in China's Apple Store?
The 64GB iPhone XR's price in China's Apple Store declined by 4.6%, from 6,499 Yuan to 6,199 Yuan.
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