After Apple lowered its first-quarter sales forecast, new iPhones have not been performing well in China and are being sold with steep discounts soon after their release.
Sales of Apple’s latest top-of-the-line smartphones have reportedly been much worse than expected in the world’s largest smartphone market, CNBC reported. The cause of the reduced sales seems to be high prices and a lack of innovative features compared to local competitors like Huawei.
One of the most recent iPhone price reductions in the country came from Suning, a large Chinese retailer, which changed the price of the 128GB version of the iPhone XR from 6,999 yuan ($1,036) to 5,799 yuan ($858) — a 1,200 yuan ($178) discount. Other retailers have begun to sell devices for even cheaper. One seller had a 256GB version of the iPhone XS Max, Apple’s most premium device, for 9,699 yuan ($1,436), much lower than the US firm’s official selling price of 10,999 yuan ($1,628). This is still more expensive than in the US where the same phone would cost $1,249.
Earlier this month, Apple CEO Tim Cook issued a statement acknowledging the company’s poor performance in the Chinese market. He put the blame on the slowing Chinese economy and rising trade tensions with the US as the key reasons for reduced sales in the first quarter. However, experts told CNBC that iPhone’s problem in China stems from incorrect pricing.
Apple’s 512GB iPhone XS Max, the most expensive of the new models, costs $1,499 in the U.S. But in Asia’s largest economy, the non-discounted price is 12,799 yuan, or nearly $1,900. Even the iPhone XR, the cheapest of new models, costs 18 percent higher than the same phone in the US.
“The trade war is background noise and more of a scapegoat excuse, with the real issues being iPhone XR demand and a mispriced product in a competitive Chinese market,” Daniel Ives, managing director of equity research at Wedbush Securities, told CNBC by email.
The rise of local Asian brands could also be a reason as their lower price points and the fact that they are domestic brands make them attractive to buyers. China’s Huawei has been growing rapidly, replacing Apple as the second-largest smartphone player by global market share last year. Huawei is also the biggest vendor in China.