A series of reports last week claimed that not only is Apple cutting iPhone prices for retailers in China, but that some of iPhone resellers in the country are passing even more significant savings on to customers.
A few days before that, Apple announced a guidance correction for the first quarter of the fiscal year 2019, following a weaker than expected iPhone sales performance during the period, with particular emphasis on China. Now, a new report says that Apple may not be done cutting iPhone prices in China this year.
A Wedbush report (via 9to5Mac) says that Apple will offer better iPhone XR prices in the market in the coming months, as it’s fighting for market share. Apple, the analysts say, is looking to defend its market share and make sure it doesn’t lose competitors to key rivals that sell lower-priced iPhone alternatives in the region:
[China is critical for Apple going forward and that’s] why we expect more significant price cuts on XR over the coming months. While some investors will fret around price cuts and what it means for top-line growth in the next few quarters and losing perception as a luxury smartphone, taking a step back it’s all about the installed base for Apple.
In our opinion Apple is facing a ‘code red’ situation in China and the right pricing strategy around XR and future versions will be key to putting a ring fence around the core installed base in the region. With lower-priced competition from all directions with Huawei and Xiaomi front and center, Apple needs to make sure that over the next few quarters they do not lose any current iPhone customers and thus speaks to the more significant price reductions on the way.
The report seems to focus on the iPhone XR and China, but it’s unclear whether Apple would take similar steps in other markets. The company slashed prices in Japan back in late November, but did it via carrier subsidies. In other markets, including the US and Europe, Apple is pushing iPhone trade-ins as a way to upgrade to a new iPhone XR or iPhone XS, marking the deal as a “limited time” offer.
Market share is crucial for the company if it wants its Services business to make up for lost hardware sale, the report says. One way to improve its offerings would be to push forward the launch of its streaming video service, which will compete directly against Netflix, HBO Now, and other alternatives.
But Apple is just starting its video streaming service, so it may need to consider an acquisition to compete against the well-established names in the business. Wedbush indicates companies including A24, Lionsgate, and Sony Pictures as the “highest probability” acquisitions for Apple, rating Viacom/CBS and MGM Studios as “medium probability” purchases. The analysts don’t believe Apple would buy Netflix or Disney outright, as has been suggested for years.