Apple is facing its biggest test in perhaps 20 years. Declining iPhone X sales are putting pressure on a company that has become dependent on its smartphone hardware. While nowhere near a crisis yet, Apple is already rethinking strategies and is preparing to slash the price of iPhones in some markets.
After announcing a disappointing earnings call built on lower than normal iPhone shipments, Apple CEO Tim Cook confirmed price cuts are likely.
“We've decided to go back to [be] more commensurate with what our local prices were a year ago, in hopes of helping the sales in those areas,” Mr. Cook told Reuters after Apple's earnings conference call.
While he did not go into detail, Cook is likely going to cut back iPhone prices 20%. You may remember that the amount the company raised the price of its smartphone when it launched the iPhone X. In one price hike, Apple fooled consumers into thinking $1,000 for a smartphone was ok.
It worked too as the iPhone X performed well. However, 2018 iPhone XS and iPhone XS Max have not sold in the huge quantities Cupertino is used to. Yes, Apple always faces a dip in S years, where the hardware is merely incrementally updated, but this feels different.
Paying the Price
Perhaps the company will defy critics again in September when the iPhone 11 launches with a new look. Either way, Cook is not willing to wait and see and is taking action now.
The CEO insists the price hike in 2018 was justified and not that much of an increase. However, the iPhone XS Max bumped the price of an iPhone flagship by $100. Elsewhere, the entry level iPhone XR replaced the iPhone 8, but cost up to $250 more.
We just think this is excuse making. Apple has thrived on high margins and the recent decline just smacks of the company getting greedy and found out by consumers. Again, this is not crisis point yet and the iPhone 11 could change the game again, but for now Apple is reeling.