Apple is taking something of an unusual step to stem the tide of losses in China that the iPhone maker said at the end of 2018 led to a shortfall in its all-important holiday quarter worth several billion dollars. That shortfall, you may remember, was attributed in large part to lower than anticipated iPhone sales volume in China, which is why it was revealed on Monday that Apple has decided to do something pretty unlike Apple in order to try and make up for it.
The solution: Cut prices. A CNBC report Monday notes that Apple took the action earlier this year on official third-party sellers in China like Tmall and JD.com. That report also speculates that Monday’s price cut may be a response to China’s increase in the value-added tax there.
The Apple cuts haven’t just included iPhone sold in China. The company actually dropped prices on most of its key products — including iPads, Macs and AirPods as well as iPhones — sold via its official online store in China by almost 6%. In one example, the price of the base model iPhone XR was cut 4.6% from 6499RMB to 6199RMB (which is equivalent to a drop from $968.34 to $923.64). Likewise, CNBC reports that the prices of both the iPhone XS and XS Max were each cut 500RMB, which is equal to almost $75.
For some more context around why Apple would do that, consider that 15 percent of Apple’s holiday quarter revenue was attributable to sales from China. During that quarter, though, Apple earned a little more than $13 billion in revenue from China, down almost $5 billion from the same quarter in 2017.
“If you look at our results, our shortfall is over 100 percent from iPhone, and it’s primarily in greater China,” Apple CEO Tim Cook told CNBC earlier this year just before the company reported its fourth quarter earnings.
Apple hasn’t set a date yet for its next quarterly earnings report, but the assumption is that it will be in early May. It will come amid a subtle shit in emphasis for the company, for which hardware sales remain the biggest revenue-generator. Nevertheless, its top leaders are also keen to grow Apple’s services revenue as hardware sales increasingly mature.
