Apple lowers iPhone costs in China, leading to a resurgence in sales.
In April, sales of foreign-branded cell phones (primarily iPhones) in China increased by 52% compared to the previous month, reaching a total of 3.489 million units, as calculated by CNN. The source of this data is the China Academy of Information and Communications Technology (CAICT), a research institution under the Ministry of Industry and Information Technology, which oversees this sector. This growth rate is significantly higher than the 12% increase seen in March, as stated in CAICT's earlier reports.
These impressive results have been highlighted by the Global Times, a Chinese state-owned news outlet known for their pro-China stance and support of domestic companies.
Apple initially faced a challenging first quarter in 2024 in China's smartphone market, where it had previously experienced a 19% drop in shipments, according to a report by Counterpoint Research. The company was facing intense competition from local brands such as Huawei, whose sales soared by almost 70% during the same period due to the successful release of their Mate 60 series.
Economic conditions appeared to contribute to Apple's struggles, as a slowdown in the Chinese economy led consumers to become more price-conscious and seek savings on various goods, including smartphones. However, this trend started to reverse in March as Apple and its retail partners began offering significant discounts. These price cuts, which intensified in the last week, were part of a marketing campaign launched during the '618' shopping festival, one of China's major annual online shopping events.
Within this festival, Apple significantly reduced the prices of some iPhone models on Tmall (a Chinese e-commerce platform owned by Alibaba) and JD.com (another prominent e-commerce platform), bringing the iPhone 15 model to the same price range as budget options from Xiaomi and Huawei.
Jefferies analysts believe that these deep discounts are the only way for Apple to maintain its position in China's smartphone market. Their analysis states that Apple has successfully put pressure on local brands like Huawei, specifically targeting their flagship models. This situation is likely to result in Apple reclaiming the lost market share, but at the same time, it may force their competitors to lower their prices further. According to Jefferies, this price war could potentially continue into the third quarter of 2024, leading to potential margins declines for all smartphone manufacturers.
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In response to the price sensitivity of Chinese consumers, Apple strategically lowered the prices of its iPhones in China, utilizing major sales events like the '618' shopping festival. The company's decision in tech business strategy led to a direct competition with local brands, such as Huawei, in terms of affordability.
Source: edition.cnn.com
