Demand Problems Loom for Apple Too

According to Bloomberg, Apple’s new iPhones—especially the popular Pro models—are now being sold in China at discounts of more than $100.

Major e-commerce platform JD.com and China’s largest carrier, China Mobile, are discounting the iPhone 14 Pro series by more than 800 yuan, and the electronics distribution hub in Shenzhen is reportedly running promotions cutting prices by over 700 yuan as well.

Apple’s own website is said to be offering no discounts, but that is hardly surprising given that Apple almost never runs promotional discounts directly on its homepage.

What is surprising is that it hasn’t been that long since the iPhone 14 series launched, and there is virtually no precedent for discounts of this magnitude so early in the cycle.

This suggests that iPhone demand in China has weakened significantly. Considering that CEO Tim Cook said on the earnings call that China’s reopening would help drive a recovery in demand, these developments can be read as evidence that actual demand in China is not as strong as he anticipated.

These concerns are not unique to Apple. Samsung Electronics has lowered its 2023 smartphone shipment target compared with the previous year (which itself was down from 2021), signaling that it expects a tough year for the smartphone market.

Until now, however, Apple has been relatively insulated from demand issues—particularly thanks to strong demand for its high-end 14 Pro lineup—allowing it to navigate the market more freely than Android OEMs like Samsung Electronics. But as signs emerge that Apple is ultimately facing demand problems as well, the likelihood has increased that the company will come under pressure on its margins.

(Apple’s revenue declined year-on-year in every segment except iPad and Services.)

In short, it seems prudent to maintain a more conservative stance on Apple’s earnings than in the past.