Apple raises prices in some countries except the US and China - Liberty

Tuesday, August 29, 2023

Apple raises prices in some countries except the US and China

 

Customer checking iPhone 14 Pro Max.

Apple's latest iPhone, the Series 14 model, is packed with features and updates, including better displays, cameras, satellite messaging, and more. However, it may come with a higher price tag depending on where you live.

Some analysts predicted that continued supply chain challenges and inflation could push Apple up prices across the board for its latest iPhones, but for potential buyers in the U.S. and China, I didn't see a price increase compared to the Series 13 model.

However, for consumers in markets such as the UK, Japan, Germany, and Australia, the latest models also saw significant price increases. For example, the base iPhone 14 model starts at $799 in the US. That's the same price the company charged for the iPhone 13 when it was released last year.

In the UK, the base iPhone 14 costs £849, or around $975. The base iPhone 13 was priced at £779, a £70 or around $80 markup. That price difference only increases with more beefed-up models. For example, the iPhone 14 Pro Max in the UK costs £150 more than last year's comparable model. The reason Apple has taken steps to increase the prices of mobile phones in these markets has to do with currency fluctuations.

"Basically every currency in the world fell against the dollar," Apple's chief financial officer Luca Maestri said during a fourth-quarter earnings call with analysts last week. ' said. “The strong dollar is making it difficult in some areas. Clearly, pricing in emerging markets are making it difficult, and the translation of that earnings to dollars has been impacted. ."

Foreign exchange is "a very important factor influencing our performance, both revenue and gross margin," said Maestri. Apple has been hedging its currency exposure "in as many places around the world as possible", but that protection is starting to dwindle as the company needs to continue to buy new contracts.

However, Maestri said Apple also looks at the foreign exchange situation when announcing new products, which has led to recent price increases. “For example, customers in international markets have sometimes had to raise prices when they launch new products, which is not what customers in the US, for example, have experienced,” he said. "And unfortunately that's the situation we're in right now with a strong dollar."


A visitor holds a new iPhone 14 at an Apple event at their headquarters in Cupertino, California, United States.

Recent currency fluctuations against the U.S. dollar have caused some international buyers to pay a hefty price for an iPhone, but in some cases, Apple paid for it instead. When the U.S. dollar also appreciated relative to other currencies in 2019, Apple adjusted foreign prices in some markets, resetting them to about the same or the same level as local currencies a year ago.

But the reason Apple did so was that sales fell as a result of the price increase. For example, in Turkey, where the local lira fell 33% against the dollar in 2019, Apple's sales fell by $700 million. “We decided to bring [the iPhone price] back to what it was a year ago in Japan,” Cook said in an interview with Reuters at the time.

But even in 2022, Apple says it doesn't see a drop in demand in those markets. Maestri noted that India, Indonesia, Mexico, Vietnam, and other countries also saw double-digit growth in their respective reporting currencies.

“It's important to see how these markets perform in local currencies because it's going to affect customer reactions to our products, our engagement with our ecosystem, and generally the strength of our brands. Because it gives you a good feeling about," Maestri said. earnings phone. “And in that regard, I have to say that we are very pleased with the progress we are making in many markets around the world.”

The US dollar has also steadily appreciated against the Chinese yuan for six months, but there are some signs that domestic demand for the new Apple iPhones may be weakening. Maestri said Apple hit a new quarterly record for September in Greater China, while a recent report from Jefferies found four new iPhone 14 sales in the first 38 days of being on sale. The model's sales in China are down 28% compared to the 2018 iPhone 13 model. Same period.

Companies feeling the effects of the strong dollar

Apple isn't the only company acknowledging the impact of currency headwinds on its business and pricing decisions.

McDonald's reported that the currency dragged revenue down by 7 percentage points and sales fell 5% year-over-year. This would have increased by 2% without currency impact. Sixty percent of the company's revenue comes from outside the United States, and "obviously, we translate those revenues into US dollars," CFO Ian Borden said on the company's earnings call last week.

At P&G, the currency hit continues to grow. A consumer goods company reported a 6% decline in net sales due to "unfavorable foreign exchange." This followed a negative currency impact of 3% and 4% in the last two quarters respectively. The company has to raise its forecast for exchange rate impact this year to $1.3 billion, and CFO André Schulten said in last week's earnings call that "foreign exchange continues to move strongly against us." said.

Coca-Cola CEO James Quincy It makes about 80% of its revenue outside the United States, Quincy said last week on CNBC's "Squawk on the Street."

Like Apple, Coca-Cola is trying to offset some of the currency headwinds by raising prices, which we expect to continue as the U.S. dollar shows little sign of weakening. “In addition to what happened this year, we expect prices to be higher than normal next year,” said Quincy.

So far, Coca-Cola hasn't reported a decline in demand due to higher prices, but Quincy said consumers could be concerned. “We are seeing that our consumers are starting to react in the same way as they did during the recession. I guess.

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