Apple Lures China iPhone Customers With Deep Discounts But Sales Stutter Amid Domestic Weakness: Report

Apple Inc.’s AAPL iPhone 14 sales in China are taking a hit as consumers tighten their purse strings amid economic uncertainties.

What Happened: iPhone 14 sales in China, since its launch on Sept, 7 have declined about 33% compared to the sales of iPhone 13 models in a comparable timeframe, Jefferies analyst Edison Lee said in a recent note, according to Bloomberg. The high-end iPhone 14 models —  Pro and Pro Max — have also seen a dip in sales, the analyst said.

Even as domestic brands saw declines in shipments, Apple’s lineup maintained its appeal, posting 5.7% growth in the September quarter, Jefferies reportedly said in a previous note.

Apple planned its production and pricing for the rest of the year, taking cues from the pivotal first few weeks of sales of the iPhone 14 lineup, Jefferies reportedly said.

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Faced with a slowdown, Cupertino is making its discounts deeper and widely available for the Nov. 11 Singles Day shopping festival, Lee said.

At Alibaba Group Holding Ltd.’s BABA Tmall, a potential customer can reportedly get a 400 yuan ($55.17) discount on iPhone 14 as the festival approaches. This compares to the zero discount that was made available for the iPhone 13 models last year on Tmall.

“Even a few percentage-points price cut would not help the demand for the non-Pro models, given unattractive price/performance, a growing used phone market and weak consumer sentiment,” Lee reportedly said in the note.

Why It’s Important: China is a vital market for Apple from the demand perspective. The recent quarterly results showed that Greater China, comprising mainland China, Hong Kong, Macau and Taiwan, contributed $15.47 billion to the company’s topline.

Apple hinted on the earnings call that it expects the December quarter’s year-over-year revenue growth to slow down from the 8% pace seen in the September quarter.

China is also key for Apple from the supply side, as a majority of its component suppliers and assemblers have factories in the country. The recent COVID-19 lockdown could pose a supply-chain problem for Apple if normalcy isn’t soon restored.

Despite Apple’s best efforts to diversify away from China, it still has significant exposure to the country on the production side. Loup Funds’ Gene Munster said in a recent report Apple’s China production exposure in 2021 was 52-55% in 2021, down from 60-62% in 2020.

Price Action: Apple closed Thursday’s session at $138.88, down 4.24%, according to Benzinga Pro data.

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