A new report from Bloomberg speculates the Apple Inc. (NASDAQ:AAPL) iPhone 5S and 5C smartphones are too costly for most Russian consumers. The flagship iPhone 5S goes for about $960 in Russia, while the budget-friendly iPhone 5C retails for $800.
Apple wants to compete with Samsung in Russia
Simon Baker, an analyst for IDC, explained to Bloomberg, “if Apple Inc. (NASDAQ:AAPL) really wants to compete with Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) [in Russia], it should’ve come up with a much lower price for the 5C.”
ValueWalk's Raul Panganiban interviews Kirk Du Plessis, Founder and CEO of Option Alpha, and discuss Option Alpha and his general approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with Option Alpha's Kirk Du Plessis
Russia is one of those countries that strictly forbids carriers from offering subsidized prices. When a customer purchases a new phone in Russia, they have to pay full price. In the United States, all a customer has to do is sign a two-year agreement to buy the phone at a subsidized price. Russian customers must pay full price and that price is rather extravagant.
Bloomberg gives a descriptive report on Apple Inc. (NASDAQ:AAPL)’s unveiling in Russia: “Six years after the iPhone’s introduction, Apple’s share of Russia’s smartphone market is hovering at about 8 percent as the device is too pricey for all but the wealthiest of the country’s 143 million people. Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) has grabbed more than 50 percent of Russian sales with its cheaper devices running Google Inc (NASDAQ:GOOG)’s Android software.”
Apple just released a lower-priced smartphone
Apple just released a lower-priced smartphone to balance out the pricier version in hopes of marketing the iPhone brand all over the world. Unfortunately, this plan may not work in all countries. Even though the retail price of the 5C in Russia is more affordable than the flagship version, it’s still pricey at $800, which is technically the average monthly income in Russia.
Baker added that it’s all really a matter of what Apple Inc. (NASDAQ:AAPL) wants, which is apparently a toss-up between having a global product while retaining market share if the phone market leans toward cheaper pricing—or keeping their focus on maximizing profit.
Time will tell if Apple Inc. (NASDAQ:AAPL) succeeds in Russia. With the new iPhone having been released on Friday, sales numbers will soon be forthcoming, and we’ll see if the reality of the situation matches up to Baker’s take on the situation.