iPhone X So Expensive In India "You Can Fly To Hong Kong, Buy It, Come Back And Save Money"

One day after the most anticipated Apple product launch in 10 years, several problems have emerged for the much hyped iPhone X, face-recognition demo flop notwithstanding: it will be substantially delayed confirming all earlier reports of supply-chain bottlenecks, and it will be expensive, perhaps prohibitively so. The introductory prices of the iPhone 8 and the iPhone 8 Plus have gone up compared to the prices of the iPhone 7 and the iPhone 7 Plus. The iPhone X, meanwhile, will price in the 4 digits well equipped. Addressing this issue, the WSJ has a front page article titled "Apple’s New iPhones Gamble on Allure of Premium Pricing."

In one place that gamble may prove insurmountable. As India Today writes, when it goes on sale in India on November 3, the iPhone X will cost Rs 89,000 for the 64GB version. The top-end variant with 256GB is going to cost Rs 102,000. "In other words, this is one expensive phone, although you can say that the iPhone has always been expensive."

To demonstrate just how expensive, on a purchase price parity basis, the iPhone X will be in India, India Today writes that "the other thing that you can say about the iPhone X is that it is cheaper in some other places. As it always happens, the market where the iPhone X is going to be the cheapest is probably Hong Kong." 

In fact, the iPhone X is so expensive in India, and so cheap in Hong Kong, that you can go Hong Kong, buy the phone, and come back and yet save some money. And this includes the cost of flight ticket to Hong Kong. Just see the math."

iPhone X (256GB) in India: Rs 102,000

iPhone X (256GB) in Hong Kong: Hong Kong Dollar 9,888. This means using the current exchange rate, in Indian currency the price is Rs 80,999.

What does this mean? It is cheaper to go to Hong Kong and buy the iPhone X 256Gb variant there.

The iPhone X will be available from November 3. Now, if you book your flight to Hong Kong today, the cheapest flight in the first week of November that you can book from Indian will cost around Rs 20,000. If you book a flight from Kolkata, you can get a return ticket to Hong Kong for little over rs 17,000. From Bangalore it is around Rs 19,000. From Delhi, around Rs 20,000. From Mumbai it is a little more expensive.

Flight ticket: Air Asia Rs 17,800

iPhone X 256GB: 80,999
Some other expenses: Around Rs 2000 to Rs 3000
Total: Around Rs 1 lakh
Money saved: Around Rs 2000

The report"s conclusion:

Now, we know the whole thing sounds like a joke. And in a way it is. No one is going to go specifically to Hong Kong from India to buy the iPhone. Also, it works best with the 256GB variant. But it does show the ridiculousness of the iPhone prices. and particularly the iPhone X prices, in India. Is it because Apple can"t price the iPhone any cheaper? Is it because Apple wants big profit margins? Is it because of Indian government taxes? Is it because Apple wants to keep the iPhone prices high so that it continues to a status symbol in India? We don"t know. Only Apple can answer these questions, if it wishes to answer them.

For now Apple is ignoring these, and various other pressing questions - including the whole animated poop emoji. Overnight Doug Kass released the following assessment of why this time Apple may have gone too far:

Apple continues to deliver an expensive smartphone relative to its peers, with many features that are already available from its competition and most of which were anticipated, including face recognition, a full-screen interface and no home button.

The only exception to reality versus anticipation was the later-than-expected availability, which is toward the end of the year (orders will be accepted on Oct. 27 and deliveries are slated for Nov. 3). As a result, analysts could take 3 million to 4 million iPhones out of their December quarter projections and reduce full-year 2018 estimates by about $0.40 a share.

However, the new Apple phone will provide an animated poop emoji so you can talk crap to your friends.

The starting price for the 64GB model of the iPhone X is $999 and $1,149 for the 256GB model. The Apple smartphone continues to be a high-priced aspirational product accompanied by a remarkably effective marketing effort that is stretching its status symbol appeal. However, I see little incremental to the latest product offerings, leaving room for disappointment relative to optimistic expectations. (It is why I initiated an Apple put position yesterday morning and added to that position when the stock was up $2 early in the afternoon).

The expectations of an Apple replacement super-cycle accompanied by higher unit volumes and much higher average selling prices, leading to expectations of a "hockey stick" of earnings growth in the coming fiscal year coupled with a general confidence in sustainable growth from there, have spurred a rise of more than 50% in Apple"s one-year forward price/earnings multiple in the last 1 1/2 years.

I clearly have underestimated the strength of and the confidence in the Apple franchise over the last year. Recognition of this has led me to maintain more of a trading-oriented short position, whereas years ago I had more of an investment short position, which proved successful. Nevertheless, I continue to believe that these aggressive "going forward" expectations for Apple and the company"s current valuation remain too ambitious.

But the biggest threat facing the iPhone and perhaps the entire Apple business model, is if its products are no longer perceived as the pinnacle of "coolness." And while it is too early to conclude either way, following yesterday"s disappointing and badly leaked release, many appear to be taking aim at Apple not as the source of brilliant Steve Jobsian innovation and "hipness", but as the target of mockery, scorn and humor. Indeed, as one readers suggested, "The bloom may be coming off the rose.  Even folks in the twittersphere piling on.  In the past there was such a halo around apple, nobody would make fun of them.  Now it seems the opposite."

Iis the idol worship coming to an end? According to these widely publicized reactions to the iPhone release, the answer appears to be yes.

Middle-Class Chinese Say A $1,000 iPhone Is "Too Expensive"

Apple Inc. had hoped that its iPhone eight might demolish the company’s sales records in China as the country’s burgeoning middle class embraced the phone, thanks in part to its name: Eight is considered a lucky number in Chinese culture, signifying wealth and fortune.

Unfortunately for the world’s most valuable company, this calculus isn’t playing out as well as its massive marketing operation had hoped for one simple reason: The price of the phone is simply too high for most members of the company"s target demographic.

However, Apple investors reacted positively to news Monday that the company"s iPhone 8 would be priced at $1,000 a unit. AAPL was up nearly 2% in early trade.

Two versions of the iPhone 8, along with a third premium model known as the iPhone X, will be officially unveiled at its product launch in Cupertino tomorrow. Details on price points of the new devices and their availability dates are still unknown, though even the cheapest of the latest top-of-the-line model is expected to cost about $1,000.

Unfortunately, the bulls could be a little short-sighted, especially considering that signs of slowing sales in some of Apple’s key growth markets have weighed on its share price in the past.

To wit, Reuters reporters spoke to regular Chinese citizens about the new iPhone – specifically, whether they intended to buy one. For Apple, their response was discouraging.

Here’s Reuters:

“Chinese shoppers, however, are already counting the cost, with the latest model tipped to have a price tag upward of $1,000 - roughly double the average Chinese monthly salary.

…

“I’ll wait for a drop in price, it’s too expensive,” said Angie Chen, 23, a project manager in Nanjing and iPhone 6 owner.

Chen said she might even wait for the new phone’s successor, when prices will fall. “It’s a nice number to hear, but there’s no rush.”

As Reuters points out, Greater China, which (according to Apple’s definition) includes Taiwan and Hong Kong, accounted for roughly 18 percent of iPhone sales in the quarter ended in July, making it the company’s third-largest market after the US and Europe. Meanwhile, the iPhone’s share of China’s smartphone shipments fell to 9% between January and June, down from 14% in 2015, according to data from Counterpoint Research.

Compounding the problem for the company is the fact that some analysts expect China to be a key driver of sales growth. Morgan Stanley analyst Katy Huberty told Bloomberg that she is watching for especially strong growth in China after the upgradeable, 2-year old iPhone base grew 56% this year, meaning more consumers are choosing to buy successive iPhone models.

Yet sales in China are down 10 percent from a year earlier, extending a nearly three-year series of declines. That contrasts with growth in all other regions. And although the Chinese currency has risen sharply against the dollar in 2017, a dramatic reversal of those gains could be imminent after Chinese authorities eliminated a requirement that sales desks set aside 20% of their revenues from sales of FX derivatives. The policy was intended to make it too costly to short the yuan, helping the PBOC fend of speculators as it sought to slow the currency’s depreciation against the dollar last year. But now, the central bank has ostensible switched off the “no” in the “no vacancy” sign at the yuan short-seller’s motel. And predictably, the yuan saw its largest drop in eight months overnight as the bears piled back in.

All of this means the phone will be more expensive for consumers, further suppressing sales as Chinese consumers stick with popular domestic brands like Xiaomi. But even with the company’s shares trading near all-time highs, despite reports of production problems that could limit supplies of the new models, whether or not another slowdown in China will actually impact the company’s shares remains to be seen.

* * *

In a preview of tomorrow"s product launch, several Apple analysts told Bloomberg what they felt would be the biggest reveals during CEO Tim Cook"s highly anticipated presentation. In terms of new features, while investors will certainly pay close attention to the iPhone"s hardware, the change that has the most significance with long-term implications is the addition of 3D-sensing capabilities that enable augmented reality applications, Gene Munster said.

While AR applications will be backward compatible to the 2015 iPhone 6S, the addition of designated 3D and computer vision hardware on the premium iPhone would be a “big step toward putting AR in the hands of everyday users” and a big step toward the “next generation of computing - beyond the smartphone," according to Munster via Bloomberg.

Performance of facial recognition on the OLED iPhone will be widely scrutinized, as the device probably won’t have a fingerprint sensor for login and Apple Pay usage, according to KeyBanc analyst Andy Hargreaves.

According to RBC analyst Amit Daryananianother, recent surveys suggest “sizable pent up demand” and excitement around the iPhone launch. With more of the hundreds of millions of iPhone users around the world expected to upgrade their devices this year, Daryananianother said the company could experience a "sales supercycle."

AAPL Stock Slips After Reports Of New iPhone "Plagued By Production Glitches"

AAPL stock is sliding this afternoon as The Wall Street Journal reports the new iPhone is said to have seen "production glitches."

Apple Inc.’s new iPhone, which is expected to be unveiled Tuesday, was plagued by production glitches early in the manufacturing process this summer, according to people familiar with the situation, which could result in extended supply shortfalls and shipping delays when customers start ordering the device later this month. New iPhones are typically in short supply when first released. But if shortfalls of the new phone extend beyond the initial sales period, which is expected to begin September 22, they could weaken analysts’ and investors’ projections for sales in the crucial holiday period.
... 

The production glitches led to a setback of about a month in the manufacturing timetable. Foxconn Technology Group, the Apple contractor that assembles iPhones, has been ramping up production at its manufacturing complex in Zhengzhou, China. The company is paying bonuses to employees who can help bring new hires on board at its Zhengzhou plant, which Foxconn said in June employs about 250,000 people.

Ironically, this was predicted three months ago by Citi analyst Jim Suva who warned that "based on industry-wide checks, we believe the significant enhancements to the iPhone 8 OLED could experience delays as it ramps to high volume production in order to meet strong demand" and as a result slashed his September iPhone delivery estimate from 47 million to 40 million.

Of course, having ignored the news in June, the stock is acting quite surprised now that the exact same story is back in the headlines. 

On the other hand, who knows: this could all be just another clever AAPL PR move to create scarcity and buzz ahead of the looming launch.