Apple is about to launch its iPhone 12 and the biggest wonder is if the price of the new device will be just as expensive or cheaper? While it is very unlikely for Tim Cook to price his devices high during the global consumer slump, the chances of the smartphone being cheaper is evident.
For this to happen two scenarios need to concurrently take place, first is the pandemic continues to worsen and secondly if China bans or boycotts Apple products. The impact could be more severe if the latter occurs, the Chinese are already feeling unjust on America’s actions, a strong Buy China sentiment is building up. Apple will be remodeling its pricing strategy, to get more sales the price surely will have to come down.
China plays a big role in price modelling
The extent to which the U.S. tech sector has become dependent on China is “under-appreciated”, said an opinion article recently published by the London-based Financial Times newspaper. Apple just like many other tech companies have enjoyed stellar sales over the decades from the sound Chinese economy. Its the new horizon for these firms who have reached saturation point in their own country, its economically sound middle income base can afford pricey Apple products. If suddenly you lose this rich base, what do you do? Look for another country with rich base or bring price down.
For Apple which will be looking at the usual suspects to fulfill orders for iPhone 12, cant afford to leave China out especially during these times where consumers are mostly holding back on spending. If its looking India to fill in the gap, the likelihood of selling millions of iPhones will be unachievable, India is traditionally a low spending nation it just cant replace China’s middle class spending power.
Tim Cook, Apple’s chief executive, quoted as saying that “three out of four people in the country(China) buying Mac computers were doing so for the first time; two out of three iPad buyers are new to the product.” Noting the potential growth for Apple there.
As for other tech sectors, five U.S. chip companies prove their dependency on China. “Nvidia, Texas Instruments, Qualcomm, Intel and Broadcom — each with a market value of more than 100 billion U.S. dollars — depend on China for between 25 percent and 50 percent of their sales,” said the article.
“It is not just the depth of dependence, it is also the breadth. Pick through the latest earnings season and you come across countless examples of U.S. tech company executives highlighting their strength in China,” it added.
Data from both Skyworks and Qualcomm were also quoted as examples. “More than 60 percent of smart phones sold in China now incorporate 5G technology. Qualcomm’s shares, too, are close to an all-time high,” it said
For those waiting for a cheaper iPhone, the stars are aligning but the question will be at what cost and to who?