U.S. tech giant anxious to cut production cost to arrest sales decline: analysts
Apple Inc will launch a new iPhone tailored for Chinese consumers, media reports said on Monday, a move that industry insiders said showed the U.S. technology giant's urgency to arrest a sales decline in the domestic market due to mounting cost pressure from the China-U.S. trade war.
The new phone will reportedly remove Face ID, the facial recognition system for the iPhone, and instead employ an under-display fingerprint function, news site caijing.com.cn reported, citing sources on the upstream industry supply chain. An industry insider revealed that this is likely to "save on costs."
A structured light laser emitter, the major component of Face ID, would cost several hundred yuan, said a Beijing-based representative who preferred to be anonymous. He told the Global Times on Monday that "only Apple can afford it but that would also affect its sales."
Apple declined to comment when reached by the Global Times on Monday.
Apple has lost many Chinese users who prefer smartphones priced at around 5,000 yuan ($731), indicated by an increase in purchases of local brands including Huawei, OPPO and Vivo.
Huawei shipped the largest number of phones in the Chinese market with a 34 percent share in the first quarter, followed by Vivo with 19 percent, OPPO with 18 percent, Xiaomi with 12 percent and Apple with 9 percent, showed data from the global industry consultancy Counterpoint Research.
Apple has attached great importance to the Chinese market but has been under continuous cost pressure amid the trade war, industry insiders said. They noted that in rising competition with local rivals, the U.S. company was anxious to reduce production costs as it cannot afford to lose the Chinese market.
Apple is reportedly shifting production of its luxury Mac Pro computer from the U.S. to China, which could help cut costs for shipping components as many of its suppliers are from China, foreign media reports said.
The large price gap with similar products has become an issue between Apple and Chinese technology users, Liu Dingding, a Beijing-based industry analyst, told the Global Times on Monday.
According to an online poll regarding "which aspect you hope Apple can optimize", "price" got the most votes from more than 209,000 netizens, followed by "battery" with nearly 56,200 votes and "signal" from more than 31,700 as of press time.
But some netizens seemed unlikely to buy the new iPhone design, as one using the name Miss Wang said on Weibo "If Apple makes such changes, why not buy a domestically produced premium phone instead?"
Apple is likely to "seize back some of the market share it lost after adjusting prices in China - to move further into smartphones ranging between 3,000 and 4,000 yuan, while maintaining its premium products," Liu suggested.
The average price of smartphones sold in China was 2,523 yuan in 2018. according to an industry report. It said that smartphones priced at more than 4,000 yuan only accounted for 13 percent of the total during the same period, and China-made brands accounted for nearly 30 percent, with a rising trend.
Analysts said that it would be helpful for Apple to launch some cheap products to arrest its sales decline in China, but doing so would also undermine Apple's high-end brand position.
It's a tough choice for Apple to strike a balance between maintaining its image and competing for market share, they said.
It's not clear when the new iPhone model will be launched and this could be a preliminary plan, said the caijing.com.cn report.
