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Should Apple decrease the prices of their products?

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Should Apple decrease the prices of their products?

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https://wolfstreet.com/2018/11/05/apple-gets-re-crushed-new-iphone-prices-too-damn-high/

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Apple suppliers are talking and filling in some details on demand for iPhones. And shares of Apple dropped another 4% mid-morning, after having dropped 6.6% on Friday, after it had reported revenues and earnings Thursday evening. Earnings and revenues rose sharply in the quarter, but only on price increases, not on increased device sales. This was spiced with an iffy forecast for holiday sales and the announcement that it would stop releasing unit-sales data for iPhones, Macs, and iPads to throw a merciful veil over the situation.

On Friday and Monday morning, market cap has plunged by about $100 billion. Shares are now down 14% from their closing price of $232.07 on October 3:

It's tough out there in the smartphone market - and that's what Apple has become dependent on. The market is mature. Overall global shipments in 2017 were flat and are expected to inch down this year, according to IDC. In this environment, sales increases come down to a zero-sum market share battle, and Apple's high prices appear to not be very helpful in that respect.

"Apple has signaled disappointing demand for the new iPhone XR" that started selling in October, the Nikkei Asian Review reported this morning, citing sources from three Apple smartphone assemblers, headquartered in Taiwan: Foxconn (Hon Hai Precision Industry), Pegatron, and Wistron.

Apple told Foxconn and Pegatron to halt plans for additional iPhone XR production lines, the sourced told the Nikkei:

"For the Foxconn side, it first prepared nearly 60 assembly lines for Apple's XR model, but recently uses only around 45 production lines as its top customer said it does not need to manufacture that many by now," a source familiar with the situation said.

According to the source, Foxconn would produce 20% to 25% fewer units (or about 100,000 fewer units per day) than the "original optimistic outlook."

Apple supplier Pegatron, according to the Nikkei, "is suspending plans to ramp up production and awaiting further instructions from Apple, a supply chain source said."

"The utilization for the XR production is not reaching its maximum capacity now," the source added.

Wistron, a smaller Apple supplier, was asked to stand by for rush orders, but has received no orders for the iPhone XR for this holiday season, according to Nikkei's sources.

This puts another big damper on hopes for breath-taking iPhone XR sales this holiday season. Among the new models, this is the less outrageously expensive one, compared to the iPhone XS and high-end XS Max.

Instead, customers appear to go for the older and less expensive iPhone 8 and iPhone 8 Plus models, for which the key suppliers are respectively Pegatron and Foxconn. The Nikkei:

"Suppliers of iPhone 8 and iPhone 8 Plus are getting a combined order of around 5 million more units," one source said. Apple previously planned 20 million units for the older iPhone models this quarter, but raised the figure to 25 million units, the individual said.

The Nikkei added:

The Silicon Valley company prepared more cautiously for production this year, looking to avoid severe inventory corrections later. Apple asked suppliers to prepare 20% fewer components for this year's new iPhones compared with last year. The company is now reviewing iPhone demand weekly to adjust orders quickly in response to the market, a source said.

Price does matter, it seems. Apple has done exceedingly well positioning and marketing its products at prices that are often far higher than those of its competition. This has produced enormous sales at big-fat profit margins, leading at the peak to a $1 trillion market capitalization, and you can't blame the company for its ingenious strategy of using its excellent and innovative products to relentlessly wring out enthusiastic consumers to the maximum possible.

But this strategy appears to have its limits in a mature or even declining market for smartphones, where the zero-sum battle for market share with Chinese and Korean smartphone makers is also fought on price.

So now is the time for Apple to step in and blow some serious money on buying back its own shares, to get them to turn around, for crying out loud.

Here's the myth of the share-buyback "blackout period" and the real price of "unlocking value." Read... Where the Heck are Share Buybacks in This Rotten Market?

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Apple Gets Re-Crushed: New iPhone Prices Too Damn High?

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Apple suppliers are talking and filling in some details on demand for iPhones. And shares of Apple dropped another 4% mid-morning, after having dropped 6.6% on Friday, after it had reported revenues and earnings Thursday evening. Earnings and revenues rose sharply in the quarter, but only on price increases, not on increased device sales.

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https://www.marketwatch.com/story/is-it-time-for-apple-to-lower-its-prices-2016-01-27

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Stalling revenue raises an existential question for Apple Inc.: Does the iPhone maker need to move down market to restart growth?

Apple rose to become the most profitable and valuable company in the world by selling consumer electronics at premium prices. The iPhone sold for an average $691 in the fourth quarter of 2015, roughly three times the $231 average selling price in 2015 of a phone using Alphabet Inc.'s Android operating system, according to researcher Statista.

But iPhone sales scarcely grew in the fourth quarter, and are projected to decline in the current quarter, for the first time since the phone was introduced in 2007. That prompted questions to Chief Executive Tim Cook from analysts on a conference call Tuesday about lowering prices.

Mr. Cook doesn't agree. "I don't see us deviating from that approach," he said. "We don't design to a certain price point. We design a great product and we make it priced at a great value."

The question will be in the spotlight soon. Apple is expected to unveil a new 4-inch iPhone in the first half of this year, according to people familiar with the matter. The new phone will be the same size as the iPhone 5S, and is expected to replace it, adding a faster processor and the capability to use Apple Pay, the company's wireless payment service.

The iPhone 5S, introduced in 2013, is now Apple's low-end model, starting at $450. It is $100 cheaper than the iPhone 6, which was introduced in 2014, $200 cheaper than last year's iPhone 6S, and $300 cheaper than the large-screen iPhone 6S Plus. However, at $450, it is still about twice as expensive as the average Android phone.

It isn't clear how Apple plans to price the new phone. An Apple spokeswoman declined to comment.

In the past, Apple has said used iPhones offer a lower-cost alternative for budget-conscious consumers. Apple doesn't get direct revenue from the sale of a used iPhone, but it benefits from an additional user who may spend on apps, movies or services.

The iPhone's price premium mattered less when telecom carriers subsidized the upfront cost of a new phone. However, as more carriers move away from subsidies, Apple's higher prices appear more stark.

Mark Moskowitz, a research analyst at Barclays, said the idea of lower prices is on the "top of everyone's mind" but cautioned against it. He said Apple faces tough comparisons to last year's booming sales of its first larger-screen models. But he said the iPhone franchise is extremely strong and the next version--the iPhone 7--is expected to arrive later this year.

Lowering prices may give the iPhone a "commodity feel," he said. "Psychologically, it's a tightrope."

Apple has long benefited from its strategy. It accounts for about 14% of the global smartphone market, according to Strategy Analytics, and yet gobbles up nearly all of the industry's profits. That is true in other Apple product categories, such as tablets and computers. In each, Apple has relatively low market share and an outsize portion of the industry's profits.

Even in emerging markets like China, Apple has thrived by sticking to the high-end of the market. The iPhone's hefty price tag helps it stand out from a fast-growing pack of low-cost smartphones and reinforces the view that it is higher quality.

Apple said it actually raised prices of certain products during the past quarter in some overseas markets to offset the impact of a strong dollar. Chief Financial Officer Luca Maestri said higher prices played a role in the company's forecast that revenue will decline.

"Inevitably over time, higher prices affect demand and so we're capturing that in our guidance," said Mr. Maestri.

For now, Apple seems focused on expanding revenue by other means. It wants to attach services to its base of iPhone users. For example, Apple said it has 10 million subscribers paying for its streaming music service. At $10 a month, Apple created a $1 billion-a-year business that didn't exist a year earlier.

It is also looking to shorten the time between new iPhone purchases. Apple introduced the iPhone upgrade program in September that effectively turns the iPhone into a subscription service for customers who want a new phone every year.

Write to Daisuke Wakabayashi at Daisuke.Wakabayashi@wsj.com and Eva Dou at eva.dou@wsj.com

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Is it time for Apple to lower its prices?

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Stalling revenue raises an existential question for Apple Inc.: Does the iPhone maker need to move down market to restart growth? Apple rose to become the most profitable and valuable company in the world by selling consumer electronics at premium prices.

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https://www.businessinsider.com/apple-price-hikes-2018-2018-12

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Apple raised prices across nearly all its product lines over the last year.

Starting prices for some of Apple's most popular products increased by about 20% on average.

Apple says the prices are justified since the products are better than ever, but that's a tough pill to swallow for customers.

In 2017, an Apple Watch Series 3 with both GPS and cellular had a starting price of $399.

This is an opinion column. The thoughts expressed are those of the author.

This column does not necessarily reflect the opinion of Business Insider.

More: Apple iPhone iMac MacBook

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Apple's price hikes have gone way too far

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Apple raised prices across nearly all its product lines over the last year. Starting prices for some of Apple's most popular products increased by about 20% on average. Apple says the prices are justified since the products are better than ever, but that's a tough pill to swallow for customers.

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Pros: Reasons to lower price for ALL their devices

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Pros: Reasons to lower price for ALL their devices

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1.  More affordable for everyone
2. Most of the time Apple products don't work that well, but you have to pay a high amount for something that doesn't work.
3. People then to update their devices when there is a new device making them to pay more money
4. Save money
5. More people would buy

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Cons: Reasons to keep the same prices for current devices

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Cons: Reasons to keep the same prices for current devices

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1. You're paying a good amount for a phone that has good camera quality
2. It would anger old customers since they had paid at a higher price for a certain device
3. Wouldn't be enough profit
4. Lowering prices of devices would be a strategy that wouldn't work forever