In an attempt to stimulate global sales, Apple will reduce the cost of some of its iPhones for the second ever time. The company will lower the cost of the phones to the prices it charged outside the US before the dollar surged.
Apple, which recently attempted to charge higher prices for iPhones, has been met with lagging sales. With the iPhone X, it raised the price of the flagship model, and as a result of currency fluctuations, the 2019 phones were even more expensive. Now, the company will drop the prices to match last year's prices.
Apple hopes to spur sales of the iPhone, especially in overseas markets like China, where a 10 percent increase in the dollar over the past year has made Apple's products much more expensive than competitors. Apple Chief Executive Tim Cook unveiled the plan after the company reported the first-ever decrease in iPhone sales during the holiday shopping period. The company has only cut iPhone prices once before, in 2007.
Apple has not specified which countries would see lower prices. Resellers in China began slashing iPhone prices earlier this month after Apple reduced its sales forecast for the quarter ended in December. The company listed its new iPhone XS, released in September, at $999, the same price in dollars as its precursor, 2017's iPhone X.
The drop benefitted US consumers, but in countries like China and Turkey, local currencies had fallen against the rising dollar, making the phone much more expensive than its predecessor a year before. Cook said Apple will regulate foreign prices in some markets by adjusting them to what they were before in local currencies.
"We've decided to go back to (iPhone prices) more commensurate with what our local prices were a year ago, in hopes of helping the sales in those areas," Cook told Reuters in an interview.
In the company's quarterly earnings call last Tuesday, Cook underlined the effect of foreign exchange rates in Turkey, where the local lira had declined by 33 percent against the dollar and Apple's sales were down by $700 million from the year before. In November, Apple also said exchange rates had affected its prices in Brazil, India and Russia.
Chief Financial Officer Luca Maestri said the price adjustments probably won’t extend to its services business, which includes Apple Music and the App Store. The services until exceeded analyst expectations with $10.8 billion in sales in the quarter ended in December, though growth has decelerated compared to previous years. Maestri said slower growth was due to the price increase in foreign markets.
"Roughly 60 percent of our services business is outside the United States, and as you know, the U.S. dollar has appreciated in recent months," Maestri said. "And in general, we tend not to reprice our services for foreign exchange on a very frequent basis."