WSJ today posted this alarming chart of Chinese consumption-tax revenue:
https://i.imgur.com/2LzUKrz.png
https://www.wsj.com/articles/chinas-economic-downturn-takes-...
Apple does see shrinking sales in other regions:
"iPhone shipments in India have dropped 40 percent so far in 2018 when compared with 2017"[1]
China and India are the 2 largest developing economies in the world. It's no surprise that Apple's high price strategy has struggled there. Charging $1,000 for a phone might be viable in developed economies, that's not the case in developing countries like China & India.
[1]https://appleinsider.com/articles/18/12/18/declining-iphone-...
"Huawei posted 33% global gains y/y, versus flat for Apple, and for Q3 in China, where Apple is reporting struggles, Huawei sales rose 13%. Have rising trade tensions created anti-American Sentiment???"
[0] https://twitter.com/quantbond/status/1080863553454780416
I think it's all about Apple losing share and being overpriced compared to competition, along with Chinese support for Chinese company.
A slow down will exacerbate this but as of now huge disparity compared to Huawei.
Here's an outline link for that WSJ article: https://outline.com/tH8sWn
And here's the passage that describes what goods are affected by that consumption tax:
> Consumption tax in China is imposed on luxury goods such as high-end cosmetics and jewelry, and items deemed environmentally unfriendly, like cars and gasoline.
I still have a had time finding the source of those data shown in the graph. Something isn't right. And remember those big drop are all happening in November and December period, because that is when Chinese are saving up for their Lunar New Year spending.
I don't buy the story of Apple down 50% YoY only because of Macros. If that was the case it would have shown in 17, and 18 as well. If Macros were worst other part of Services Sector would have shown. Single Days wouldn't break record, Mi, Huawei, Vivo, OnePlus, Oppo wont affected domestically.
Also from Bloomberg: Chinese consumer tax receipts down 70% in November. https://www.bloomberg.com/opinion/articles/2018-12-31/china-...
High pricing can often be self-justifying, especially if it's combined with actual higher quality - except once you reach the point that a thing involves too many material sacrifices and then suddenly the "value proposition" stops making sense.
Combine that with:
"In fact, categories outside of iPhone (Services, Mac, iPad, Wearables/Home/Accessories) combined to grow almost 19 percent year-over-year."
In other words, even Mac and iPad fell in China while growing overall for the company. So the problem is not isolated to iPhones in China, consumer spending is way down. And yes, aspiring high-end products like Apple products will take a hit in a market where consumers have less money to spend.
https://www.apple.com/newsroom/2019/01/letter-from-tim-cook-...
Another question - why do people spend $30k on a car when a $10k car is nearly as good? Seems like a much bigger waste of money than the phone.
Why? I hate driving and would rather be reading or goofing off on twitter than being angry behind the wheel as I get somewhere.
Not for everyone but I'll never go back to driving.
Hard to argue with $8k for 250k miles.
No matter how much money I pay for an Android phone, I have to fight with it to stop my data being harvested by everything from the very OS up. Sure, I can get decent quality cameras and build quality on Android phones but I’m either paying a stack of money for the likes of a Samsung or I’m paying for something from some sketchy Chinese brand.
I don’t know if any android phone manufacturer has a hardware security implementation as high quality as Apple’s and even if there were, I’m not sure how many of the manufacturers I’d actually trust to build it properly, let alone have the OS use it properly.
I’ve also got far more consistent battery life out of my iPhone X than I have out of my previous Android phones.
Am I paying a premium? Yep. Is it a premium I’m happy to pay because I actually get what I want and my data is so far, more secure than on any Android device: yep.
Ah well.
I should have been an easy sale. After a bad experience with Android, I have no desire to go back. Budget isn't an issue. But if Apple is going to price phones like laptops, I'm going to upgrade as slowly as I upgrade my laptop. (Which given how long it took them to get more than 16GB of RAM, I've gotten used to doing pretty slowly.)
And those $300 phones don't have a mind-blowing camera, but the latest gen flagships phones finally do. That, plus the fact that phones become obsolete much more slowly now, makes those $1k phones a worthwhile investment to me.
A lot of phone have roughly comparable specs, but the camera and overall software behavior is not comparable on lower-tier phones.
Since the 2013 iPhone 5s is still getting updates, I suspect that the 6s will still get updates at least through 2020.
But right now, you can get an iPhone 7 for $449. Again, if history is any guide, it should get OS updates through 2021.
Where I live iPhone is a status symbol. People buy them because they want to show off that they can afford it rather than because there is some special functionality they use. To me iPhone is like Rolex Watch most people who own them probably don't need them and could make do with something much cheaper.
edit: Good example my coWorker told me about her 14 year old daughter begging her for an iPhone. It's the "cool" brand people want. When I was that age I remember Nokia 3210 was the phone everyone wanted. When you have that sort of luxury appeal you can charge more for the product and people will pay.
The answer is a critical function of marketing.
I can also have a firewall NoRoot Firewall), more granular privacy controls, I can root and and replace my hosts file, and some other nifty security/privacy things for paranoids like me.
Is it as polished as an iPhone? No Does it cover all my needs fully (and them some)? Yes Did I pay 1/6 of the price? Yes (trust me I can affort any smartphone) Do I think Apple is milking it and offers nothing new? HELL YES
I am happy that their stock is getting slapped, Apple put themselves in that position.
As for the Chinese economy, at some point many countries will reduce imports from China for a variety of reasons, and the slowing dowin is inevitable. Apple messed it up on many domains. Now they are paying for it.
Personally, iMessage and shared iPhoto galleries between a dozen family members around the globe make it fairly "sticky" with me, but there's no reason I couldn't just consume the photos on desktop.
I'm not sure I have much of a point here, but I don't think the switching costs have ever been all that high with mobile, and since the popular platforms are pretty mature, most 'necessary' apps are cross-platform.
Just last night I re-evaluated the various photo services that were of most interest to me (Apple Photos, Google Photos, OneDrive, Amazon Photos), and settled on Apple Photos. As a macOS/Windows/Android user, who is normally pretty aggressively platform-agnostic I see abandoning mobile access to my photo library as the least-bad option available.
Chinese users also buy apps, take photos, watch movies, listen to music, create content. All of which on iOS is tied to the Apple services ecosystem and hence the switching costs are still significant.
In the US and EU, Apple has people locked into their ecosystem. That doesn't apply to China. WeChat is their alpha and their omega. They use it not only for chatting, as you might expect from its name-- WeChat is in many ways their _entire operating system_.
You pay your utility bills with WeChat, it's your social network, map app, phone app for VOIP, video calls, you access local services, your banking, payments like Venmo, your healthcare, read the news, buy stuff from online stores, EVERYTHING is in WeChat.
And WeChat is cross-platform.
Apple greatly increased prices in the US/EU also and many of these regions are facing a recession too, but according to Tim Cook's letter those consumers didn't abandon the iPhone. What's unique to the Chinese market? WeChat.
as for WeChat again wrong, THE map app it's Baidu maps, for shipping you have Taobao and JD, not WeChat, same for watching TV shows, same for short funny videos, same for other social stuff, same for games
you are overstating significance of WeChat, yes it has monopoly in messaging and social networking plus significant majority in payments over Alipay but that's it, other uses drop a lot and don't hold so during foothold over other apps
Apple made a mistake and priced incorrectly but that was not after consideration, thought and strategy.
A writer for Bloomberg or an analyst for Loup Ventures is in a different league as far as risk and predictions and job rigor. Apple made a mistake but by the same token the same people making the decisions have done pretty well generally and (wait for it) way better than most SV companies, VC or angels who get multiple do-overs in their daily decision making and analysis.
I bought a new car in '10 because the manufacturer gutted the feature set on the '11 model, once they figured out that the '08 recession was real. I much preferred the original feature set, so I had to buy at a way inconvenient time, about 6 months early, before the dealers ran out of stock.
We groused in the 80's about Sony for selling us cheaper, outdated versions of consumer electronics that they sold domestically. You can't recoup R&D costs when the exchange rate is as lopsided as the Yen was at the time.
Apple is being dragged down the trade war's reputational halo effect. Keep an eye on major international consumer US brands (Disney, McDonalds, Starbucks, and others).
Obviously there's an rapid economic deceleration, too, but things happen for more than one reason most of the time.
Apple is losing it's innovation edge as well. Current flagship phone cycles in China are faster than Apple's -- triple, quad cameras, in-screen fingerprint readers, articulating selfie-cams, pinhole selfie screens, and a much better storage proposition (much more NAND for the price in almost every Chinese Android flagship).
not better...
> Apple is losing it's innovation edge as well.
Apple's edge has always been its implementation. They were not the first in smartphones, computers, tablets, wireless earbuds. Instead, they make their best attempt at hardware in a sophisticated ecosystem.
> triple, quad cameras, in-screen fingerprint readers, articulating selfie-cams, pinhole selfie screens
If these technologies become commonplace, we'll see them in the iPhone, too. And, if history is a guide, we'll think that Apple made them up, too... because of how well executed their products are.
You don't have to purchase the most expensive iPhone to get a high quality phone from Apple. Attributing the decreased demand in China to the price of the most exclusive phone seems misguided to me.
And people complain iPhone buyers don’t look past marketing...
for messaging and social plus payments (though Alipay it's significant but smaller competitor), sure pretty much zero competition, but for streaming video, music, games etc. no way...
When my 6s died recently (power connector issues) I picked up a moto g6 it works fine for me. My personal age of Apple is now completely over. Over about 3 years or so, I went from all Apple (powerbooks/macbook pros, apple tv, iphones, ipad) to no Apple. It was fun while it lasted.
Current laptop is a ASUS 15.6" TUF Gaming FX504GE Laptop. Generally, I just buy a $600-$900 laptop each time the hinges short out (~24 months)
https://gadgetmatch.com/apple-samsung-huawei-global-smartpho...
Many companies, not just Apple, are raising their ASPs, or cutting categories to pursue more affluent customers while tacking on corporate debt to buyback shares in efforts to prop up share prices.
I believe what we're seeing isn't an Apple-ism, this is market behavior. And the market is dictating that Tim Cook and others make these decisions from the top down.
Almost all auto manufacturers in America are dropping a few cars in their lineup in favor of more expensive SUVs, which people are willing to purchase. And there are many other instances of this behavior going on. Don't pay mind to Apple doing this. Instead, focus your time reading on why companies in the CRSPTM1 are all doing similar things regarding consumer purchases.
With the T10Y2Y approaching zero, and eventually negative percentages, I believe we're sitting on a ticking time-bomb that goes off sometime between 2020-2022, but I'm not educated enough to know if this is highly probable or not.
Random inflation calculator is telling me that 2019 prices should be 6% more than 2015 prices. So right there you're talking about $690 for the same phone this year. The 55% apparent increase in phone price over that period is more like 50%. Which is still huge, but not quite as huge.
These things will answer whether or not Apple in the future will go back to selling phones within the ~$600 dollar range.
Apple is not aiming for mass market. In the same way that Chanel or Coach is not aiming for mass market.
