Why did Apple raise iPhone prices in other markets except the US and China?

Apple’s latest iPhones, the 14 series models, come with better displays, higher camera quality, and satellite communications, among other new features and updates. However, depending on the country where the customer lives, they may also come with a higher price tag.

Some analysts predict that Apple may raise prices for the latest iPhone models due to unresolved supply chain challenges and inflation, but potential customers in the US and China are not. I don’t see an increase in iPhone 14 prices compared to 13 models.

Meanwhile, for consumers in markets such as the UK, Japan, Germany and Australia, the latest iPhone models have seen significant price increases.

For comparison, the base iPhone 14 model starts at $799 in the US, the same price as the iPhone 13 when it was released last year. Going to the UK, the basic iPhone 14 costs £ 849, or about $975. This price is basically significantly higher than the £ 779 of the iPhone 13.

That price difference continues to grow with higher-end models. For example, the iPhone 14 Pro Max in the UK is £150 more expensive than last year’s equivalent model.

The reason Apple made the move to increase the price of phones in these markets has to do with currency fluctuations.

In response to this, during last week’s latest quarterly earnings call, Apple CFO Luca Maestri said the increase was because every major global currency weakened. against the USD. He also noted that the strengthening of the USD makes it difficult in some ways, making it difficult to value and transfer revenue in emerging markets to USD.

While Apple reported an 8% increase in revenue last quarter to $90.15 billion, Apple CEO Tim Cook told CNBC last week that the company would see “double-digit” growth without the dollar. Strong USD.

Sharing the same view, Mr. Maestri said the exchange rate is “a very important factor” affecting Apple’s results, both in terms of revenue and gross margin. Apple hedges its currency in as many places around the world as it can, he said, but those protections are starting to shrink as the company needs to keep buying new contracts.

But Mr. Maestri said Apple also considers the foreign exchange landscape when launching new products. This is what has led to the most recent price spikes.

While recent currency fluctuations against the USD are causing some international buyers to pay more for an iPhone. There are also cases where Apple “absorbs” those costs on behalf of customers.

As in 2019, when the dollar also appreciated against other currencies, Apple adjusted prices in some overseas markets and set them to near or equal to the local currency price a year earlier.

However, the reason why Apple did so was due to a decrease in sales due to an increase in selling prices. In Turkey, for example, where the local lira fell 33% against the dollar in 2019, Apple’s revenue fell by $700 million.

Going into 2022, Apple says it doesn’t see a drop in demand in these markets. Mr. Maestri noted that the group has seen double-digit growth in India, Indonesia, Mexico, Vietnam and other countries even in their respective reported currencies.

The dollar has also steadily risen against the Chinese yuan for six months, but there have been some signs that demand for Apple’s new iPhones in the country may be waning. While Mr. Maestri said Apple recorded new records for the September quarter in China, a recent report from investment bank Jeffries said sales of four new iPhone 14 models in China. Country in the first 38 days fell 28% compared to iPhone 13 models in the same time period.