Retailers are slashing iPhone prices across China as consumers say the phones aren’t worth the cost

Apple’s latest iPhone models are facing huge discounts in China as retailers try to sell the struggling devices.

That comes as the top-of-the-line Apple smartphones have posted poor China sales on what experts say are too-high prices for the world’s largest smartphone market and a lack of innovative features compared to local competitors like Huawei. The technology giant itself acknowledged earlier this month that unexpectedly low sales in the Chinese market would likely lead to worse-than-anticipated first quarter revenues.

One of the most recent iPhone cost cuts 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 third-party sellers on the site had the devices for even cheaper, offering flash sales to try to unload iPhones. One seller had a 256GB version of the iPhone XS Max, Apple’s most premium device, for 9,699 yuan ($1,436), way below the U.S. firm’s official selling price of 10,999 yuan ($1,628) for that smartphone.

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Still, that remains more expensive than in the U.S., where the same phone would sell for $1,249, according to the Apple website.

And that’s just on one site. Other retailers in China are also putting their iPhones on sale. Sunion, an Apple re-seller, was advertising 700 yuan off for both the 128GB and 256GB versions of the iPhone XR. E-commerce site Pinduoduo, which allows third-parties to sell products, also had hefty discounts across all of the latest iPhone models.

Apple’s issues in China are down to two major factors, experts and local consumers say: It got its pricing wrong, and it has failed to introduce features to excite consumers in a forward-thinking technology market. Now, analysts said, competitors have taken market share in the premium smartphone space.

A matter of price

In a public letter released on Jan. 2, Apple CEO Tim Cook blamed the slowing Chinese economy and rising trade tensions with the U.S. as one of the key reasons for lowering first quarter sales guidance. Experts, however, told CNBC that much of the iPhone’s China problem comes down to the company setting the wrong prices.

For example, 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 un-discounted price is 12,799 yuan, or nearly $1,900 — a more than 26 percent premium. Other variations of the latest iPhone models have similar price premiums in China.

Of note, the XR was meant to be the cheapest of the new models, but it has proven to be too pricey for many Chinese consumers — who were asked to pay a 28 percent premium compared to American buyers.

“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.

“It’s time for Cook and Apple to look in the mirror, take their medicine around pricing and execution and move forward with the biggest installed base in the world to turn this ship around from this dark chapter in Cupertino,” he added.

Apple has given no indication about whether it will cut prices in its official stores in China. The company did not immediately reply to a CNBC request for comment sent on Friday.

Across China, Apple is offering a deal where it will sell the iPhone XR for 4,399 yuan ($651) if a customer trades in an iPhone 7 Plus, a two-year-old handset. That’s a bid to get users to upgrade, but not all iPhone owners in China are keen on purchasing a newer device.

Karen Xiao, an iPhone 7 user living in Guangzhou, said the prices of the new iPhones are too high and her current model still works fine.

“For me, the function is good enough. For me, using the internet and just phones — I don’t play games. So the function can satisfy my needs,” Xiao told CNBC, adding that newer models don’t offer “major differences” that appeal to her.

The Huawei effect

Despite the negative international headlines that have hit Huawei over the past few months, its consumer business continues to thrive. The Chinese technology giant replaced Apple as the second-largest smartphone player by global market share last year. It’s firmly the biggest vendor in China.

Chinese consumers say they’ve been attracted to Huawei’s newest features, the price points and the fact that it’s a domestic brand.

“Using Huawei’s mobile phones is supporting domestic brands. We hope our brands can go international,” Vikey, a Guangzhou-based Huawei user, told CNBC.

An attendee inspects a P20 Pro smartphone, manufactured by Huawei Technologies, during its unveiling in Paris, France, on Tuesday, March 21, 2018.

Author: Core