Apple phones during the epidemic: absent 5G, cutting prices to survive?

During this period, Apple once again started a rare price reduction mode.

On April 2, Suning Mobile's official Weibo account announced that iPhone 11 has started to be reduced in price across the board, with the maximum price reduction reaching 1,600 yuan. The lowest price for iPhone 11 is 4,999 yuan.

Currently on Suning.com, all models of iPhone 11 Pro Max have been reduced by 1,600 yuan, with the lowest price being 7,999 yuan; iPhone 11 Pro has been reduced by 1,200 yuan, with the 64G version priced at 7,499 yuan; at the same time, iPhone 11 has also been reduced by 500 yuan, with the lowest 64G version priced at 4,999 yuan. In addition, previous generation models such as iPhone XR have also seen price cuts to varying degrees.

On April 3, following Suning, JD.com announced price cuts for the entire iPhone 11 series. JD.com platform shows that the entire iPhone 11 product line can get a discount of up to 1,600 yuan with coupons, of which the iPhone 11 can get a discount of 500 yuan, as low as 4,999 yuan; the iPhone 11 Pro Max can get a discount of 1,600 yuan, as low as 7,999 yuan.

In addition, the previous generation iPhone model, the iPhone XR 64G, is priced at 3,999 yuan on JD.com after coupons; the iPhone XR 128G can be purchased at 4,499 yuan with an immediate discount of 500 yuan after coupons.

In addition to Suning and JD.com, channels such as Gome have also joined the price reduction ranks, with the iPhone 11 reduced by 500 yuan, the iPhone 11 Pro reduced by 1,200 yuan, and the iPhone 11 Pro Max reduced by 1,600 yuan.

It is reported that this is the first large-scale and drastic price cut in China since the release of iPhone 11. What is the purpose of this operation?

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A helpless move

Apple's price reduction can be said to be a cleanup.

According to the reporter's previous understanding, under the influence of the new crown epidemic, Apple has successively closed other retail stores outside Greater China, and as the epidemic develops, the reopening time of these closed stores has been delayed again and again. It is understood that Apple has 511 retail stores worldwide, and now only 42 in China are open for business.

According to foreign media reports, Deirdre O'Brien, Apple's senior vice president of retail and talent, said in a memo to internal employees that the company expects "all offices to maintain flexible work arrangements and all retail stores in the United States to remain closed until early May."

Ming-Chi Kuo, a well-known technology analyst who has been paying close attention to Apple's developments for a long time and deputy director of the research and strategy department of Tianfeng International, predicts that if the global epidemic fails to improve significantly before the end of the second quarter, the sales volume of each Apple product will decline by 10%-20% this year.

Under this situation, lowering prices seems to be Apple's only option.

Suning said that due to the impact of the global epidemic, Apple hopes to further increase sales through drastic price cuts. At least in the domestic market, the successive substantial price cuts of iPhone products are still very popular among Apple fans, and the sales boosting effect is very obvious.

Last year, iPhone launched multiple rounds of price cuts. In January 2019, e-commerce platforms such as JD.com, Tmall, Suning, and Pinduoduo successively lowered the prices of iPhone products, including the latest models at the time, such as the iPhone XS and iPhone XS Max. Subsequently, Apple officially launched a promotion, indirectly lowering the price of the iPhone XR by issuing vouchers to users who traded in old phones for new ones.

In March 2019, the prices of iPhone products including the then new models such as iPhone XS MAX and iPhone XS all reached historic lows.

According to Tmall information at the time, from the price reduction on March 5, 2019 to 12:00 on March 7, the overall sales volume of iPhone on Tmall platform increased by 150% month-on-month. Among them, the sales volume of iPhone XS Max increased by 230% month-on-month.

Based on past experience, every price cut of iPhone products can boost sales. Industry insiders said that this substantial price cut should also play a significant role in sales promotion.

In addition to the impact of the epidemic, Apple's overall shipments have continued to decline in the past two years. In order to increase shipments and ensure market share may also be one of the reasons why Apple is reducing prices for promotions.

Data shows that in 2019, Apple's market share in the global market was 14.5%, ranking after Samsung and Huawei, with shipments of 198 million units.

Earlier this year, British research firm Canalys released a latest report on the Chinese mobile phone market. The report showed that in 2019, Huawei continued to sit firmly at the top of the Chinese smartphone market with a market share of 38.5%, and Apple ranked fifth after OV and Xiaomi.

Data released by the China Academy of Information and Communications Technology also showed that the total shipments of the domestic mobile phone market in February were 6.384 million units, of which only 490,000 were iPhones, accounting for only 8% of the total shipments of the domestic mobile phone market, a decrease of 60% compared with the same period last year.

It is worth mentioning that it is not clear whether this price reduction campaign in e-commerce channels was led by Apple or was a voluntary action of the above platforms. Apple did not give any response to this.

Absence of 5G

During the epidemic, we have seen that domestic mobile phone manufacturers are still very active, releasing their own 5G products one after another. This wave of operations is very heartbreaking for Apple. After all, as of now, Apple's 5G mobile phone is still nowhere to be seen.

Not only that, the current pricing of new 5G phones in China will also pose a huge threat to Apple. The latest 5G mobile phones are priced as low as 2,000 yuan. For example, the starting price of Redmi K 30 Pro is 2,999 yuan, and the Honor 30S is priced from 2,399 yuan.

For users, 5G mobile phones are very attractive both in terms of price and themselves. Users with low brand loyalty may choose 5G products based on the Android system, which will also cause Apple to lose some users.

Therefore, some industry insiders have analyzed that the price reduction of the iPhone 11 series can improve the overall cost-effectiveness of the product to make up for the competitive disadvantage brought about by the lack of 5G.

At the same time, Apple's new iPhone 12 5G mobile phone is scheduled to be unveiled at the autumn launch conference in the second half of the year. Before the release of a new phone, manufacturers often reduce the price of old models. This year will also be the first time that Apple releases a 5G mobile phone, which is highly anticipated.

According to reports, Foxconn said in an internal conference call with investors that the new iPhone will start trial production on time in June and mass production in August, and there will be no delay.

However, the epidemic is still spreading, and it is still unknown whether Apple's press conference will be postponed.

It is understood that although Foxconn claimed that it had restored 80% of its production capacity in mainland China in March, at the current time of global supply chain integration, even if Foxconn factories restore full production capacity, production in other regions will stagnate and the entire supply chain will be affected.

Recently, Morgan Stanley analyst Katie Huberty said in her latest report that if Apple releases new products in the fall, the supplier's production capacity may not keep up, and Apple's 5G iPhone may be delayed, or even pushed to 2021. According to the worst-case scenario, the 5G iPhone may not be available until mid-2021.

However, the report also pointed out that Apple will rebound once the recession caused by the epidemic ends.

Huberty believes that "Apple has the best chance of returning to its previous long-term revenue and profit growth trajectory, given its industry-leading customer retention rate and solid balance sheet, which will allow it to remain steady in investments compared to its competitors even if the recession is prolonged."