12 Apr

How China Helped Make iPhones More Affordable

WRITTEN BY Ruchi Gupta

Apple’s iPhone revenue declined 15%

This month China started rolling out its tax cuts, which are aimed at stimulating growth in an economy that has been slowing down recently amid trade tensions with the United States. As a result of China lowering sales tax for businesses, Apple (AAPL) has cut prices on several of its products in the country, including the iPhone, Xinhua reported.

The economic slowdown in China was blamed for Apple’s disappointing results in the 2018 December quarter. That quarter was the first holiday quarter that Apple reported declines in both revenues and profits. Revenue from the iPhone, Apple’s main source of revenue, fell 15% YoY to $52 billion in the December quarter amid weak sales in China.

How China Helped Make iPhones More Affordable

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Besides a slowing economy, a weaker Chinese currency also makes iPhones, which are priced in dollars, more expensive for buyers in the country, which contributed to the soft demand for the iPhone in the December quarter. Apple said it would start pricing the iPhone in local currencies outside the United States to cushion its customers from price swings caused by changes in forex rates.

iPhone becomes more affordable in China

The iPhone price has dropped by more than 3.0% in China thanks to the tax cut, thereby making the product more affordable for Chinese consumers.

The iPhone business is to Apple what advertising is to the likes of Google, Baidu (BIDU), and Facebook (FB). The iPhone business contributed about 62% of Apple’s total revenue in the December quarter. The advertising business contributed 98% of revenue for Facebook, 83% of revenue for Google parent Alphabet (GOOGL), and 78% of revenue for Baidu in the December quarter. Twitter (TWTR) and Yelp (YELP) derived 87% and 96%, respectively, of their revenue from advertising in the December quarter.

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