The Apple series 14 iPhone came with a price increase for many international buyers as the tech company deals with the impact of a strong U.S. dollar and currency headwinds.
Apple CEO Tim Cook said the organization confronted almost 600 basis points of currency headwinds last quarter, in a quarter in which it would have had twofold digit revenue growth if not for the solid dollar.
There is priority at Apple changing its prices in specific nations due to currency headwinds, and numerous buyer organizations, including Coca-Cola, are discussing extreme valuing choices as the strong dollar hits earnings and the purchaser gives indications of weakening.
Apple’s newest iPhones, the series 14 models, come with better displays, cameras, and satellite messaging, among other features and updates. But depending on where you live, they also may come with a higher price tag.
While some analysts projected that Apple might increase the price of its latest iPhones across board due to continued supply chain challenges and inflation, potential buyers in the U.S. and China saw no increases compared to the series 13 models.
But for consumers in markets like the U.K., Japan, Germany, and Australia, the newest models also came with significant price increases.
For example, the base iPhone 14 model starts at $799 in the U.S., the same price that the company charged for the iPhone 13 at its release last year.
In the U.K., the base iPhone 14 costs £849, or roughly $975. The base iPhone 13 was priced at £779, an increase of £70 or roughly $80.
That price difference only increases with the more enhanced models. For example, the iPhone 14 Pro Max in the U.K. is £150 more expensive than the equivalent last year’s model.
The reason Apple took the step to increase the price of phones in those markets has to do with currency fluctuations.
“Essentially every currency around the world has weakened against the dollar,” Apple CFO Luca Maestri said on the company’s fourth-quarter earnings call with analysts last week. “The strong dollar makes it difficult in a number of areas. Obviously, our pricing in emerging markets makes it difficult, and the translation of that revenue back into dollars is affected.”
While Apple reported that its revenue increased 8% in the quarter to $90.15 billion, Apple CEO Tim Cook said the company would have grown “double-digits” if not for the strong dollar.
Foreign currency exchange is “a very significant factor that is affecting our results, both revenue and gross margin,” Luca Maestri said. Apple does hedge against its currency exposures “in as many places as possible around the world,” he said, but those sorts of protections do start to reduce as the company needs to continue to buy new contracts.
However, Apple also examines the foreign exchange landscape when it launches new products, Maestri said, which led to these most recent price increases.
“In some cases, for example, customers in international markets had to … they saw some price increases when we launched the new products, which is not something that, for example, U.S. customers have seen,” he said. “And that’s unfortunately the situation that we’re in right now with the strong dollar.”
While recent currency fluctuations versus the U.S. dollar are causing some international buyers to pay more for an iPhone, there have been instances where Apple instead absorbed those costs.
In 2019, when the U.S. dollar also saw a rise in value compared to other currencies, Apple adjusted foreign prices in some markets and reset them to near or the same as they had been in local currencies a year prior.
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However, the reason Apple did that was due to a decline in sales as a result of the price increase. For example, in Turkey, where the local lira had fallen 33% against the dollar in 2019, Apple’s sales were down $700 million.
“We’ve decided to go back to [iPhone prices] more commensurate with what our local prices were a year ago, in hopes of helping the sales in those areas,” Cook told Reuters in an interview at the time.
But in 2022, Apple says it has not seen any drop off in demand in those markets. It rather saw double-digit growth in India, Indonesia, Mexico, Vietnam, and other countries even in their respective reported currencies.
“It’s important for us to look at how these markets perform in local currency because it really gives us a good sense for the customer response to our products, the engagement with our ecosystem, and in general, the strength of the brand,” Maestri said on the earnings call. “And I have to say, in that respect, we feel very, very good about the progress that we’re making in a lot of markets around the world.”
The U.S dollar has also risen steadily against the Chinese yuan over the six months, but there have been some signs that demand for the new Apple iPhones in the country might be weakening.
While Maestri said Apple saw new September quarter records in Greater China, a recent report said that, China sales of the four new iPhone 14 models over their first 38 days of being sold are down by 28% compared to the iPhone 13 models over the same period of time.
