On the 10th anniversary of its launch has the iPhone lost its place in the hearts of Hong Kong traders?

Nikki Sun
Parallel traders buy and sell the new iPhone 7 during the opening day of sales outside an Apple store in Hong Kong on September 16, 2016.
Isaac Lawrence | AFP | Getty Images

With U.S. tech giant Apple celebrating the 10th anniversary of its first-generation iPhone on Monday, some Hong Kong dealers are feeling a chill as the market darling is no longer a cash cow.

The launch of Apple's first-generation iPhone in 2007 created a thriving "grey market" in Hong Kong. The same device was usually 10 percent cheaper in the city than in mainland China thanks to the free port's zero-duty treatment for most electronic products.

This allowed many local dealers to make a living by exploiting the price difference of iPhone products between the city and the mainland. The first few days of a product launch often saw the price doubling due to limited supply through official channels.

Ten years on, however, the "iPhone boom" seems to have lost its magic for dealers, as the "grey industry" is facing a slower economy, dwindling tourism, the depreciation of the Chinese yuan and tighter regulation.

Slowing iPhone demand?

Sin Tat Plaza, a popular mobile gadget hub in Mong Kok, has been a distribution center for Apple products, where shop owners collect iPhone models from individual sellers and resell most of them to mainland buyers.

At 12.30pm on a Saturday afternoon, only half of the shops were open.

A small mobile shop owner surnamed Choi told the Post his business had dropped 60 to 70 percent since last year, as profits from iPhones dwindled.

"The business is certainly harder than before," he said.

He added that the depreciation of the yuan and the same launch time adopted for Apple products in Hong Kong and on the mainland had made the city's iPhones less attractive to customers across the border.

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Choi said more than 1,000 devices were sold a month a few years ago, but now he could only sell about 100.

He said Apple products used to contribute some 70 percent of his revenue, but now it had dropped to just 30 percent.

Like Choi, the city's retail sector benefited from the strong performance of Apple's flagship phone until last year. Retail sales under the category of "unclassified durable goods" jumped in the double digits each time Apple rolled out a new model.

Another long-time electronic shop owner, Ho Char-wing, still remembers the days when the iPhone 4 took the city by storm with its stainless steel frame.

"The design of the iPhone 4 and 4s changed the most," he said, adding people were still willing to buy the model at premium prices half a year after it first appeared.

The popularity of the Apple phone also transformed his shop.

Consumers still want iPhone 7: Munster

Ho replaced the traditional Nokia, Motorola and Japanese models with the newest iPhone and accessories. At its peak, some 80 per cent of what he sold were iPhone-related products and half his customers were from the mainland.

The thriving business, however, declined sharply in the past two years, especially after the implementation of the new Competition Ordinance, which seeks to prohibit unfair business practices such as price fixing and bid rigging.

Ho said big electronic chains such as Broadway were able to offer much lower retail prices, prompting smaller operators to follow suit. For example, the profit for a brand new iPhone decreased from about HK$300 to just HK$100.

"The business needs to be diversified," Ho said, adding the shop now also provides repair and data transfer services.

Another retailer, Sky Cheung, said he was thinking about quitting the business. He said the profit he made from iPhones was down from about HK$2,000 to a few dozen dollars.

"It doesn't make sense for me to keep on," he said.

The slump has also hit the real estate sector. A property agent at the plaza told the Post that about 15 percent of the shops on the second and third floors were empty, and the rest had had their rent cut by a third.

However, beside the factors unique to Hong Kong, the sale of iPhones seems to be losing momentum worldwide amid fiercer competition.

Apple reported its first decline in annual sales and profits in 15 years for the year ending last September, with iPhone sales down by 5 per cent in the fourth fiscal quarter.

"From a consumer point of view, the iPhone definitely transformed the smartphone market with its touch screen and user-friendly interface compared with the old [personal digital assistants] with a pen or devices with a button keyboard," CLSA senior analyst Mariana Kou noted.

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