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Here’s Apple’s Answer to iPhone Demand Problem

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Feb. 6 2019, Published 1:14 p.m. ET

Pricing iPhone in local currency

Apple (AAPL) mostly prices the iPhone in US dollars. But a stronger dollar ends up making the iPhone more expensive in international markets where customers are paying with local currency, which in turn affects iPhone sales. This challenge hurt iPhone demand in some countries during the December quarter, resulting in the iPhone revenue decline that also pulled down Apple’s overall revenue and profit. To address this problem, Apple is considering pricing the iPhone in local currency outside the United States, Apple CEO Tim Cook told Reuters.

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iPhone revenue declined 15%

Apple’s iPhone revenue fell 15% YoY to $52 billion in the December quarter, which is the company’s first quarter of fiscal 2019. The iPhone revenue also missed consensus estimates at $53 billion. Since the iPhone business accounts for nearly two-thirds of Apple’s sales, weakness there resulted in Apple’s company-wide revenue falling 5.0% YoY in the December quarter.

Apple suppliers take a hit from tepid iPhone demand

Weak iPhone demand is not just an Apple problem. It’s a problem for Apple suppliers too. When Apple cut its revenue guidance for the first quarter in early January, the stocks of many of its well-known suppliers plunged.

The stocks of Apple suppliers Qorvo (QRVO), Lumentum (LITE), and Corning (GLW) fell 9.1%, 8.4%, and 6.2%, respectively, after Apple cited weak iPhone demand as the reason behind its downward revenue guidance revision, CNBC reported. Intel (INTC) was also caught up in the sell-off in Apple supplier stocks with its stock falling 5.5%. Intel supplied modem chips used in the latest iPhone models.

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