Tim Cook just admitted the price of iPhones may be too high

Before you go, we thought you'd like these...

PM Modi pushes Apple CEO Tim Cook for more iPhones in India

Apple CEO Tim Cook just gave his most detailed commentary yet on the effect the high price of the iPhone has on the device's declining sales. In an interview with NDTV's Vikram Chandra in India, Cook was asked a tough question about whether the iPhone — which costs about $600 in the US but is more expensive almost everywhere else in the world — was really worth it.

iPhone sales were down 16% in the most recent quarter, and iPhone is losing market share to Android almost everywhere. Analysts believe iPhone sales will continue to decline all through this year.

Cook replied that he did think the iPhone might be priced too high in India, and he said the company would consider lowering it: "I recognise that prices are high. We want to do things that lower that over time to the degree that we can," he said.

That is a significant admission.

RELATED: The evolution of the iPhone

19 PHOTOS
Evolution of the iPhone
See Gallery
Tim Cook just admitted the price of iPhones may be too high
Apple CEO Steve Jobs holds up an Apple iPhone at the MacWorld Conference in San Francisco, Jan. 9, 2007. Apple Inc., on a tear with its popular iPod players and Macintosh computers, is expected to report strong quarterly results Wednesday. (AP Photo/Paul Sakuma)
Jeff Gamet, from the Internet magazine The Mac Observer, looks at the new Apple iPhone at MacWorld Conference and Expo in San Francisco, Wednesday, Jan. 10, 2007. Apple Inc. is a tight ship when it comes to corporate secrets, regularly suing journalists and employees who leak data about upcoming products. Although few people outside of Apple's headquarters knew product specifications for the iPhone before its announcement, the device was widely anticipated. (AP Photo/Paul Sakuma)
An advertisement for the upcoming iPhone is displayed in the Apple store in SoHo, Friday, June 22, 2007 in New York. The long anticipated gadget hits the market on June 29th. (AP Photo/Dima Gavrysh)
A television journalist holds the Apple iPhone, the only one given to a journalist in Los Angeles before it went on sale, as he interviews people waiting to buy the iPhone outside the Apple store at The Grove in Los Angeles, Friday, June 29, 2007. After six months of hype, thousands of people Friday will get their hands on the iPhone, the new cell phone that Apple Inc. is banking on to become its third core business next to its moneymaking iPod players and Macintosh computers. Customers were camped out at Apple and AT&T stores across the nation. The gadget, which combines the functions of a cell phone, iPod media player and wireless Web browser, will go on sale in the United States at 6 p.m. in each time zone. (AP Photo/Kevork Djansezian)
A customer holds a demonstration Apple iPhone during the release of the Apple product and the opening of a new Apple Store at Woodland Hills Mall in Tulsa, Okla., on Friday, June 29, 2007. More than 500 people waited in line. (AP Photo/David Crenshaw)
Apple Inc. CEO Steve Jobs announces the new Apple iPhone 3G during the keynote speech at the Apple Worldwide Developers Conference in San Francisco, Monday, June 9, 2008. Jobs announced innovations to the Mac OS X Leopard operating system and an enhanced iPhone. (AP Photo/Eric Risberg)
An older Apple iPhone is shown next to an advertisement for the new iPhone 3G at an AT&T store in Palo Alto, Calif., Tuesday, July 8, 2008. To sustain the momentum of the original iPhone's success and keep fickle consumers and Wall Street happy, Apple Inc. needs a dramatic second act with the next generation of iPhones, which roll out Friday with faster Internet access and lower retail prices. (AP Photo/Paul Sakuma)
A shop worker holds the new Apple iPhone 3GS in Barcelona, Spain, Friday, June 19, 2009. (AP Photo/Manu Fernandez)
Apple CEO Steve Jobs smiles as he uses the new iPhone 4 at the Apple Worldwide Developers Conference, Monday, June 7, 2010, in San Francisco. (AP Photo/Paul Sakuma)
Apple iPhone at the Apple Worldwide Developers Conference, Monday, June 7, 2010 in San Francisco. (AP Photo/Paul Sakuma)
FILE - In this Feb. 10, 2011 file photo, Chris Cioban, manager of the Verizon store in Beachwood, Ohio, holds up an Apple iPhone 4G. Verizon Wireless, the nation's largest cellphone company, announced Tuesday, June 12, 2012, that is dropping nearly all of its phone plans in favor of pricing schemes that encourage consumers to connect their non-phone devices, like tablets and PCs, to Verizon's network. (AP Photo/Amy Sancetta, File)
Apple CEO Tim Cook during an introduction of the new iPhone 5 in San Francisco, Wednesday, Sept. 12, 2012. (AP Photo/Eric Risberg)
People queue outside the Apple Store as the iPhone 5 mobile phones went on sale in Amsterdam, Netherlands, Friday Sept. 28, 2012. (AP Photo/Peter Dejong)
In this photo taken Wednesday, Sept. 11, 2013, new plastic iPhones 5C are displayed during a media event held in Beijing, China. Last year, eager buyers in Beijing waited overnight in freezing weather to buy the iPhone 4S. Pressure to get it — and the profit to be made by reselling scarce phones — prompted some to pelt the store with eggs when Apple, worried about the size of the crowd, postponed opening. Just 18 months later, many Chinese gadget lovers responded with a shrug this week when Apple Inc. unveiled two new versions of the iPhone 5. (AP Photo/Ng Han Guan)
A customer examines a new iPhone 5s at the Nebraska Furniture Mart in Omaha, Neb., on Friday, Sept. 20, 2013, the day the new iPhone 5c and 5s models go on sale. (AP Photo/Nati Harnik)
Apple CEO Tim Cook discusses the new Apple Watch and iPhone 6 on Tuesday, Sept. 9, 2014, in Cupertino, Calif. (AP Photo/Marcio Jose Sanchez)
Two new iPhone 6 are photographed at the Apple store in the city centre of Munich, Germany, Friday, Sept. 19, 2014. A large crowd had gathered in front of the Apple store ahead of the offical launch of Apple's new iPhone. (AP Photo, dpa,Peter Kneffel)
FILE - In this Sept. 19, 2014 file photo, a customer looks at the screen size on the new iPhone 6 Plus while waiting in line to upgrade his iPhone at a Verizon Wireless store in Flowood, Miss. A newly-discovered glitch in Apple's software can cause iPhones to mysteriously shut down when they receive a certain text message. (AP Photo/Rogelio V. Solis, File)
Apple CEO Tim Cook introduces the new iPhone 6s and 6s Plus during an Apple media event in San Francisco, California on September 9, 2015. Apple unveiled its iPad Pro, saying the large-screen tablet has the power and capabilities to replace a laptop computer. AFP PHOTO/JOSH EDELSON (Photo credit should read Josh Edelson/AFP/Getty Images)
of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION

Apple's mantra has been that the company only makes the best products and doesn't want to compete on price. That's how Apple maintains its enormous profit margins. So any notion that Cook may try other strategies that include lowered prices, especially in a market the size of India, would be important.

Previously, Cook only hinted in a vague way, back in January, that the high price of the iPhone is hurting its sales.

While the US price of the iPhone is about $600, currency fluctuations and local taxes increase the price to the equivalent of $931 in places like Brazil, and $671 in the UK. That makes the iPhone leagues more expensive than Android models, which have 90% of the functionality of iPhone. Here's a comparison chart from Deutsche Bank:

Chandra's question really summed up Apple's problem in a nutshell. Not only is the price high, but a lot of Apple services — like iBooks — don't actually work in India. That makes the iPhone look like a bad deal. Here's the crucial part of the NDTV interview:

Chandra: It's expensive. Even in dollar terms it's expensive because you have taxes in India and then you don't necessarily have all the functionality that you would in the US. So you've got an iPhone here which is more expensive than it is in the US, with less functionality than you would have in the US, and in a country where purchasing power is a fraction of what it is in the US.

Cook: The challenge there is the duties and the taxes and the sort of compounding of those, it takes a price and it makes it very high. Our profitability in is less in India, materially less. But still I recognise that prices are high. We want to do things that lower that over time to the degree that we can, so we're looking at a number of different things. What we wouldn't do is lower our quality bar.

Cook later went on to repeat Apple's historical position, which is that "We're only going to make a product that we think is a great product. And that means we are not going to compete in some of the other price bands." But then he went back and repeated his statement that iPhone prices could come down:

Cook: But I want the consumer in India to be able to buy at a price that looks like the US price. That would be my objective. And I want the user experience to have all the services.

That statement would imply that Cook wants to see a 24% cut to the average price of the iPhone in India.

Clearly, none of this is a cast-iron guarantee that Apple will start competing on price. Cook was playing to an Indian audience, which doesn't want to hear why it's OK that Indians pay a 31% increase for their phones compared to Americans. Nonetheless, it shows that Cook is aware of one of the key problems holding the iPhone back: The smartphone market is no longer growing, and Apple has already fully captured the high-end of the market. Yet Apple needs to grow, and it's difficult to see where that growth will come from if 1 billion people in Asia can't afford the product.

Here is the entire interview:

Read Full Story

People are Reading