Wednesday , July 28 2021

This Ives of & # 39; Wedbush says Apple needs to reduce prices in China

When it comes to China, Apple can & # 39; is facing a situation "code red" and can & # 39; need to respond with & # 39; dramatically it something that rarely do – reduce prices on recently launched products.

To Apple transforms b & # 39; success itself in & # 39; service company, as was talking CEO Tim Cook, need to keep the basis of its customers, This Ives, an analyst who covers the company for Wedbush , said in & # 39; & # 39 note, a new research. But it risks losing a significant part of its customer base in China since the iPhone priced its new XR too high, he said.

To arrange its ship, Apple will need to "reduce" b & # 39; significantly the price of the XR in the coming months – perhaps b & # 39; 20%, said Ives.

"Apple needs to ensure that over the next few quarters losing any current customers & # 39; the iPhone, so speak with more significant reductions in road price in China, in the opinion our, "said Ives. "This is a smart and necessary strategy."

Representatives of Apple did not respond to an email that sought comment on the & # 39; Ives report.

Read more: Hey Tim Cook, there is a simple solution to the problem of selling your iPhone

Some thought that the XR is a big hit

Apple introduced the XR last autumn as an alternative & # 39; a lower price for its main models XS. It has many of the same features, but less expensive screen and lower price. While XS models starting at $ 1,000, the XR starts from $ 750. When launched, some observers expected that the XR is a breakout hit.

Apple launched the iPhone XR in other autumn as an alternative & # 39; lowest price for its leading XS phones.
Justin Sullivan / Getty Images

Instead, many consumers seem to refuse left XR too expensive. Apple reportedly reduced production XR repeatedly since launched. Earlier this month, the company warned that its sales of holiday quarter to meet its forecasts and criticized the weak sales of the iPhone, particularly in China.

Ives pointed finger & # 39; on the XR for that failure. There the device has a price basis & # 39; 6499 RMB, which is & # 39; about $ 960.

"As discussed with & # 39; investors, was the hubris of & # 39; pricing & # 39; Apple on XR iPhone was the main factor in the earnings disappointment & # 39; December the company, "said Ives, left & # 39; bull on the stock & # 39; Apple, a "best" rating and b & # 39; $ 200 price target.

Many analysts, including Ives, believe that the future for Apple is in selling services to owners of its devices. The segment of the company's services were of the businesses the fastest growing in recent years and offers like Apple Music, iCloud storage, and the money that Google pays to Apple as the engine & # 39; research default for the iPhone. In order to segment its services continues to grow, Apple needs to at least maintain its user base, said Ives.

Apple needs to sell iPhones to manage demand for its services

That is a chronic challenge. The smartphone owners tend to change their equipment every two to three years, and some use it as an opportunity to switch type & # 39; devices have a iPhone for Android devices, or vice versa . The customers & # 39; Apple tended to be very loyal, but the error of its price XR can & # 39; test those links, particularly in China, said Ives.

He said that about 350 million iPhone should be replaced in the next year to 18 months. Of these, approximately 60 to 70 million owned & # 39; Chinese consumers, he said. The danger for Apple is that those customers, because of its high price, do not expect more to buy their next device, but instead of buying cheaper equipment from a competitor. That is why it is crucial for the company to reduce its prices, he said.

"If the declining installed base in China, Apple for many years will face an uphill battle in the region," said Ives.

He suggested that Apple can & # 39; increase sales of the XR by reducing the price to around RMB 5,200, or about $ 768. Reports from China in recent days indicate that some retailers already cut their prices on XR models and other iPhone.

Ives acknowledged that price reductions can & # 39; saved from an already nervous investors. Some may regret that Apple will take more revenue from such a reduction or lose its image as a brand & # 39; luxury. He said that these considerations are not as important as keeping its user base.

The decline in prices "is a smart and necessary strategy for Apple since it is a story & # 39; & # 39 installed base; forward," he said. He added that the growth of its services business "will be removed from that premise for the next decade, China is clearly a key ingredient in the recipe for future & # 39; Apple's success."

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