Apple has tried a number of pricing and marketing strategies in China to arrest the falling iPhone demand, but recent analyst reports suggest that Tim Cook and his team have not been able to reverse the trend.
Speaking to Bloomberg, Longbow Research’s Shawn Harrison discussed the trends being seen in the supply chain that reflect on the iPhone demand:
“Multiple iPhone price cuts did not stop China iPhone search trends from weakening further while February supplier sales were abysmal, decelerating on a year over year basis vs. January,” Harrison wrote in a research note Tuesday. Of 42 Apple suppliers, he wrote, 37 of them “reported worse than seasonal sales” in February.
Harrison added that there was “weaker interest year over year” for iPhones, citing search data for both Google and China’s Baidu. In February, Baidu iPhone searches were down 47 percent from the prior year, per his data.
Although Apple is slowly moving towards a revenue model that focuses on software and services that transition will take time, and the lion’s share of revenue and profit comes from hardware sales in general and the iPhone in particular. With US and European markets effectively saturated, growth in China and the other BRIC territories is a vital bridge from Apple’s current financial hardware first business model.
That’s not going well. Apple Insider’s Roger Fingas:
The company’s iPhone sales dove 15 percent in the December quarter, leading to lower-than-anticipated revenue of $84.3 billion. This was blamed primarily on the Chinese market, where competition from lower-cost local smartphone brands overlapped with Apple once again hiking iPhone prices.
The company has tried a variety of pricing tactics to revive iPhone sales, but these appear to be lessening the damage rather than turning things around. Some analysts have predicted that Apple won’t see a true recovery in iPhone demand until 2019 models launch this fall.
Apple COO Jeff Williams is aware of the impact that the high sticker price of the iPhone is having on sales, but acknowledging the issue in public is one thing. Acting on the issue is another. Apple is in the mid-point of the release cycle of the iPhone, but indications so far on the 2019 hardware show Cupertino continuing to choose the same high-priced ‘premium’ smartphone route.
Meanwhile customers in China are turning to models with a rapid turnover of design and higher specifications, while traditional markets are looking for cheaper and older iPhones.