Two weeks ago, well before the most recent Apple "sell-thru" scare hit AAPL stock and pushed it into bear market territory, or down 20%, from its recent highs, we warned that the company faces a risk of inventory correction [7]as a result of at least three channel checks (and soon thereafter, more) confirming deteriorating iPhone sales, indicative of either company specific or, worse, a broader drop in market demand for smartphones.
Today we get another confirmation just how bad Apple end-demand has become, with news out of India that Apple has cut prices of its latest iPhone 6s and iPhone 6s Plus by up to 16% just two months after their launch in India to boost flagging sales in what is historically its most crucial quarter as demand for the flagship devices nosedived from a Diwali high.
According to the Economic Times [8], the price of the iPhone 6s 16 GB model, which was introduced at Rs 62,000 on October 16, has fallen by 11-16 per cent and now ranges between Rs 52,000 and Rs 55,000, according to four large retailers who spoke to ET. The price cuts are across all variants - 16 GB, 64 GB and 128 GB — of both models. Apple had introduced the iPhone 6s and 6s Plus at Rs 62,000-Rs 92,000, about Rs 8,000-Rs 9,500 more than launch prices of iPhone 6 and 6 Plus. The models wereRs 14,000-Rs 16,000 costlier than those available in the US, Middle East and Hong Kong, raising concerns that demand would be hurt.
The average difference in prices of all iPhone 6s and 6s Plus devices between launch time and now is about 15 per cent, a top executive at a national retailer said.
The reduction also narrows the gap with prices of iPhone 6 devices launched in 2014, making an upgrade more attractive for customers. "The price difference between the iPhone 6 and iPhone 6s was a lot, so many customers are not willing to upgrade to the new model," said a senior executive of another national retailer.
Highlighting the severity of the demand slump, ET notes that this is the first time that the price of an Apple flagship has been brought down within two months of launch, underlining concerns around the initial pricing, said Tarun Pathak, senior analyst at Counterpoint Technology Market Research. Apple declined to comment on the matter.
The collapse in demand is evident not only at the MSRP level, but in total shipments sent to the country: Apple imported almost 320,000 of the latest iPhones in October in India, the world's fastest-growing smartphone market, sparking hopes of its best ever quarter. Shipments have slumped since then and the latest data suggests that imports of the new models fell 62 per cent to 120,000 in November.
It wasn't just the flagship product: prices were also slashed on the iPhone 5s model for the third time in three months, and its price now starts at Rs 24,999, almost half its September price.
The price cuts indicate that Apple maybe trying to revive demand in the October-to-December quarter, which has historically been the strongest period for the company due to its flagship launches.
The ET's attempt to spin the glum data for Tim Cook as follows: "Analysts said the price cut could re-ignite iPhone 6s and iPhone 6s Plus demand in the coming months. "Now that they have aligned prices, we can see some sales happening in future quarters, which will also sustain Apple in the typically weaker periods of January to September," Pathak added."
Alas, with Apple the gating factor was never price. In fact, the higher, the better as it infused the product with a coolness factor, and showed that consumers would be willing to pay virtually anything just to obtain Cupertino's "latest and greatest" gizmo.
This is no longer the case, and in fact the one worst thing that could happen to Apple is the admission that it, too, is a "mortal" company subject to the laws of supply and demand and price elasticity of demand.
The market appears to have already gotten the memo, however, and as the chart below shows, as of Friday AAPL suffered its most recent bear market drop from recent all time highs.
[9]
