4 ms·

Or maybe Chinese customers are just more sensitive to price increases than customers in other countries?

doctorpangloss 8y ago
Sensitive is an understatement. I'm sure if you included the effective subsidies China-homed conglomerates enjoy, the ratio of COGS between e.g. Apple and Huawei could be as high as 4:1. Huawei can certainly afford to make phones cost 1/4th as much, although Apple could also afford to cut prices by 38 percentage points (as per their margins). On the other hand, China-homed companies aren't responsible to public markets (Wall Street really) in the same way US-homed are. You could book a 1% margin, but your family owns the company, so the board isn't going to take away your private jet, let alone dump you as CEO. In the US, the "family owned" (in the sense of being management controlled) mega-techs like Facebook and Snapchat are actually suffering greatly due to their poor accountability. It's truly bad for equities, even while Facebook and Snapchat book ever-growing revenues. It will be an interesting reckoning. Not the change in consumer tastes in China, mind you, which doesn't really matter for share prices. It'll be an inevitable change in corporate culture. After all, there are millions of extraordinarily talented people in China who will want the kinds of riches and glamor only a certain privileged minority get to experience. If the bottom line doesn't motivate public accountability, ambition will. That's healthy for everyone, but it will signal the end of sclerotic, state sponsored corporations in China. So as always, the Chinese consumer is the victim. They get to enjoy phones that cost 1/4th as much as an iPhone. But in exchange, they forfeit a certain kind of life fulfillment that, in my opinion, they deserve.
- throwaway12iii 8y ago
  Or... the Chinese phones are better (for them).
braythwayt 8y ago
Let's say that there are no external factors, like changes to China's economy. If this is just Chinese customers being price sensitive, I stick with what I said above. Me sitting in Toronto saying, "iPhone is too expensive for me, I have a mortgage to pay" is still irrelevant, because Apple is hitting its targets in Canada, the US, and so forth. Maybe it is too expensive for me personally (I'm on an iPhone but it's a 6, not a 6s, not a 7, not an 8, not an X of any kind), but I don't speak for my economic zone.
tanilama 8y ago
If there is no subsidies in US from carriers, I would say that would be a better comparison. Consider that 40% US family had less than 400 in their bank account.
- votepaunchy 8y ago
  Subsidies have been largely eliminated but phones are now generally purchased on 0% interest installment plans (no more early termination fees).
  - ineedasername 8y ago
    Interest free installments are all well and good, but as subsidies were phased out, there was really no decrease in overall plan price. So now we pay full freight on the handset and still have the same bill.

Sensitive is an understatement. I'm sure if you included the effective subsidies China-homed conglomerates enjoy, the ratio of COGS between e.g. Apple and Huawei could be as high as 4:1. Huawei can certainly afford to make phones cost 1/4th as much, although Apple could also afford to cut prices by 38 percentage points (as per their margins). On the other hand, China-homed companies aren't responsible to public markets (Wall Street really) in the same way US-homed are. You could book a 1% margin, but your family owns the company, so the board isn't going to take away your private jet, let alone dump you as CEO. In the US, the "family owned" (in the sense of being management controlled) mega-techs like Facebook and Snapchat are actually suffering greatly due to their poor accountability. It's truly bad for equities, even while Facebook and Snapchat book ever-growing revenues. It will be an interesting reckoning. Not the change in consumer tastes in China, mind you, which doesn't really matter for share prices. It'll be an inevitable change in corporate culture. After all, there are millions of extraordinarily talented people in China who will want the kinds of riches and glamor only a certain privileged minority get to experience. If the bottom line doesn't motivate public accountability, ambition will. That's healthy for everyone, but it will signal the end of sclerotic, state sponsored corporations in China. So as always, the Chinese consumer is the victim. They get to enjoy phones that cost 1/4th as much as an iPhone. But in exchange, they forfeit a certain kind of life fulfillment that, in my opinion, they deserve.

throwaway12iii 8y ago
Or... the Chinese phones are better (for them).

braythwayt 8y ago

Let's say that there are no external factors, like changes to China's economy. If this is just Chinese customers being price sensitive, I stick with what I said above. Me sitting in Toronto saying, "iPhone is too expensive for me, I have a mortgage to pay" is still irrelevant, because Apple is hitting its targets in Canada, the US, and so forth. Maybe it is too expensive for me personally (I'm on an iPhone but it's a 6, not a 6s, not a 7, not an 8, not an X of any kind), but I don't speak for my economic zone.

tanilama 8y ago

If there is no subsidies in US from carriers, I would say that would be a better comparison. Consider that 40% US family had less than 400 in their bank account.

votepaunchy 8y ago
Subsidies have been largely eliminated but phones are now generally purchased on 0% interest installment plans (no more early termination fees).
- ineedasername 8y ago
  Interest free installments are all well and good, but as subsidies were phased out, there was really no decrease in overall plan price. So now we pay full freight on the handset and still have the same bill.