Apple facing iPhone challenges in SE Asia from price pressure

Why is AI perpetuating the same goofy story that financial media pundits keep spouting?  Apple is not transitioning to a services based company.

They are a design company that’s rounding out their offerings.  iPhone (or whatever future personal communicator) will always be a core facet, and then everything around it as a support construct. 

So what?  I'm glad Apple isn't stooping to the level of Asia's garbage phone market.  Let the seagulls fight over crumbs for all I care.

Instead, why not focus on which company is actually making all the profits?

AppleInsider said:

Apple's iPhone is competing with considerably cheaper rivals in the Southeast Asia smartphone market, Canalys analysts advise, with approximately 62% of the region's smartphone shipments stemming from Chinese-based smartphone brands.

Hold the presses! Somebody should let the world know about this shocking news!

AppleInsider said:

The analysis concentrated on the top five smartphone brands, but Apple wasn't among the list.

"top five smartphone brands" by what measure? Unit sales? Say "the top five smartphone brands by unit sales" rather than parroting the Canalys report which is clearly not trying to present facts in an objective manner.

The top five smartphone brands by profit... well, number one is Apple and I don't think any other company's phone business is profitable so what's the point of trying to find four others?

AppleInsider said:

Apple's main problem remains the vast amount of cheaper rival smartphones that are available on the market, offered at a fraction of the price of the premium iPhone lineup.

And somehow, despite a blip recently, they're still making a ton of money from the iPhone.

AppleInsider said:

"With 75% of shipments consisting of sub-$200 models, the market here is focused on mid-to-low-end smartphones, a segment where brand loyalty is low," said Canalys analyst Matthew Xie.

Again, not new information.

If you're going to tell us some analyst's opinion based on a report with a smattering of facts that are presented in a manner that supports the author's argument, please make it clear that you are doing that. Right now, this article reads like you agree with the Canalys report, and I doubt that's what you're aiming for.

FileMakerFeller said:

AppleInsider said:

Apple's iPhone is competing with considerably cheaper rivals in the Southeast Asia smartphone market, Canalys analysts advise, with approximately 62% of the region's smartphone shipments stemming from Chinese-based smartphone brands.

Hold the presses! Somebody should let the world know about this shocking news!

AppleInsider said:

The analysis concentrated on the top five smartphone brands, but Apple wasn't among the list.

"top five smartphone brands" by what measure? Unit sales? Say "the top five smartphone brands by unit sales" rather than parroting the Canalys report which is clearly not trying to present facts in an objective manner.

The top five smartphone brands by profit... well, number one is Apple and I don't think any other company's phone business is profitable so what's the point of trying to find four others?

AppleInsider said:

Apple's main problem remains the vast amount of cheaper rival smartphones that are available on the market, offered at a fraction of the price of the premium iPhone lineup.

And somehow, despite a blip recently, they're still making a ton of money from the iPhone.

AppleInsider said:

"With 75% of shipments consisting of sub-$200 models, the market here is focused on mid-to-low-end smartphones, a segment where brand loyalty is low," said Canalys analyst Matthew Xie.

Again, not new information.

If you're going to tell us some analyst's opinion based on a report with a smattering of facts that are presented in a manner that supports the author's argument, please make it clear that you are doing that. Right now, this article reads like you agree with the Canalys report, and I doubt that's what you're aiming for.

In iPhone terms it is shocking to a point.

All other aspects being equal, nothing has really changed from an iPhone perspective as there have always been cheaper alternatives from Android vendors.

So, what has changed? That is the real question and most people will agree that something has changed.

Since 2017, Android premium flagships have leapfrogged Apple on price/value and are offering consistently more feature laden phones for less than iPhones. Those features quickly cascade down into lower end models and the result is that Apple gets squeezed at every price point (and price matters).

Some here argue that Android phones simply throw specs onto the heap every few months but fail to understand that those 'specs' are what users want.

People will say 'I don't need fast charging because I charge overnight'. Or fast charging 'kills batteries'.

What they don't tell you is that they are compensating in use so as not to run out of juice before bedtime. And they never back up the claim that fast charging kills batteries because the reality is that modern fast charging doesn't 'kill' batteries at all.

They say tri-cameras aren't 'necessary', that more optical zoom is a spec and nothing more etc. The truth is that camera versatility is very much appreciated by anyone with access to those devices and camera tech has been a smartphone tentpole feature for years now.

Those are comments I've read right here in the forums (not by everyone of course) but it shouldn't be difficult to understand why Apple could suffer in markets where features and price compete with iPhone not only in the low to mid ranges but also in the premium and ultra premium bands. 

However, if Apple were to respond to this situation, an obvious first stop is to adjust pricing down and see how much it helps.

On the other hand Tim Cook left us with a revealing tidbit during the last earnings call (from AI):

Q: In three to five years, will Services be tethered to the iPhone?

Cook: Many services not tethered to iPhone sales now, "We'll see what we do in the future."

avon b7 said:

FileMakerFeller said:

AppleInsider said:

Apple's iPhone is competing with considerably cheaper rivals in the Southeast Asia smartphone market, Canalys analysts advise, with approximately 62% of the region's smartphone shipments stemming from Chinese-based smartphone brands.

Hold the presses! Somebody should let the world know about this shocking news!

AppleInsider said:

The analysis concentrated on the top five smartphone brands, but Apple wasn't among the list.

"top five smartphone brands" by what measure? Unit sales? Say "the top five smartphone brands by unit sales" rather than parroting the Canalys report which is clearly not trying to present facts in an objective manner.

The top five smartphone brands by profit... well, number one is Apple and I don't think any other company's phone business is profitable so what's the point of trying to find four others?

AppleInsider said:

Apple's main problem remains the vast amount of cheaper rival smartphones that are available on the market, offered at a fraction of the price of the premium iPhone lineup.

And somehow, despite a blip recently, they're still making a ton of money from the iPhone.

AppleInsider said:

"With 75% of shipments consisting of sub-$200 models, the market here is focused on mid-to-low-end smartphones, a segment where brand loyalty is low," said Canalys analyst Matthew Xie.

Again, not new information.

If you're going to tell us some analyst's opinion based on a report with a smattering of facts that are presented in a manner that supports the author's argument, please make it clear that you are doing that. Right now, this article reads like you agree with the Canalys report, and I doubt that's what you're aiming for.

In iPhone terms it is shocking to a point.

All other aspects being equal, nothing has really changed from an iPhone perspective as there have always been cheaper alternatives from Android vendors.

So, what has changed? That is the real question and most people will agree that something has changed.

Since 2017, Android premium flagships have leapfrogged Apple on price/value and are offering consistently more feature laden phones for less than iPhones. Those features quickly cascade down into lower end models and the result is that Apple gets squeezed at every price point (and price matters).

Some here argue that Android phones simply throw specs onto the heap every few months but fail to understand that those 'specs' are what users want.

People will say 'I don't need fast charging because I charge overnight'. Or fast charging 'kills batteries'.

What they don't tell you is that they are compensating in use so as not to run out of juice before bedtime. And they never back up the claim that fast charging kills batteries because the reality is that modern fast charging doesn't 'kill' batteries at all.

They say tri-cameras aren't 'necessary', that more optical zoom is a spec and nothing more etc. The truth is that camera versatility is very much appreciated by anyone with access to those devices and camera tech has been a smartphone tentpole feature for years now.

Those are comments I've read right here in the forums (not by everyone of course) but it shouldn't be difficult to understand why Apple could suffer in markets where features and price compete with iPhone not only in the low to mid ranges but also in the premium and ultra premium bands. 

However, if Apple were to respond to this situation, an obvious first stop is to adjust pricing down and see how much it helps.

On the other hand Tim Cook left us with a revealing tidbit during the last earnings call (from AI):

Q: In three to five years, will Services be tethered to the iPhone?

Cook: Many services not tethered to iPhone sales now, "We'll see what we do in the future."

There is another aspect to this that many are not recognizing - but as a former cost accountant, I would bet on it.  Specifically:
Using high volume, cheaper products to absorb manufacturing overhead thus enabling high end products to provide the main profits.   Let me explain:

Typically, half to 75% of a factory's costs are fixed or semi-fixed -- stuff like heat, light, management, property taxes, depreciation, building & equipment maintenance, etc. etc. etc...   And, basically, those costs don't change much whether the factory makes one unit, a million units or 10 million units.

So, say a factory's fixed costs run $100.    If they sell 10 high end, low volume units then each of those units have to absorb $10 of those costs.   But, if they sell 100 low end, high volume units then each absorbs only $1.

But, the best, most profitable scenario is when the factory sells both:  100 low-end, high volume units PLUS 10 high-end, low volume units.   From the aspect of those fixed costs, those last 10 high end units are pure profit.

But, in a way, everybody wins:  The factory wins.   The buyers of both the cheap phones and the high end phones win because they get them cheaper than they otherwise would.   

Admittedly, without being on the inside, there is no way of knowing that this cost sharing is going on.   But all indications are that it is because many smart phone factories produce both cheap phones and high end iPhones - thus leveraging their facilities to best advantage.   But that's ok -- because, in the end, everybody wins.