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Here's why Apple is cutting iPhone prices in China

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Why is Apple so expensive?
Key Points
  • Retailers across China are slashing prices of the iPhone.
  • Sales of Apple's flagship product are down nearly 20 percent in China, according to research firm IDC.
  • Comparable phones in China retail for far less than the price of an iPhone

Retailers across China are slashing prices of the iPhone.

Apple announced last month it would cut prices of some of its flagship devices, by pegging its retail value to local currencies instead of the strong U.S. dollar.

In recent months, there have been growing concerns about the iPhone maker's ability to innovate — as its Chinese rivals up their game as well. It also comes amid signs that Apple's growth and dominance in the smartphone market could be under pressure.

iPhone shipments were down nearly 20 percent in China in the fourth quarter of 2018, according to research firm IDC. The slump in China was partially responsible for a 27 percent decline in Apple's revenue coming from the world's largest smartphone market.

On the other hand, things are looking bright for Chinese telecoms giant Huawei Technologies.

The smartphone maker saw its shipments in China grow 23 percent in the same time period and in mid-2018, according to IDC. Last year, Huawei became the world's second largest smartphone seller behind Samsung, surpassing Apple briefly — the iPhone-maker has since reclaimed it's second place.

According to an IDC report in January, global smartphone shipments fell nearly 5 percent in the fourth quarter of last year.

That could in part be due to customers around the world holding onto their phones for longer periods.

But Apple's slump in sales in emerging markets like China and India also come down to its expensive price range.

Compared to smartphones from China, iPhones are not cheap. For instance, the iPhone XS Max, costs nearly $1,400 — about twice the price of Huawei's Mate 20 and nearly three times the cost of Xiaomi Mi Mix 3.

iPhone prices are "just too expensive," Kiranjeet Kaur of IDC told CNBC last week. "At what iPhones used to sell at earlier, there's like lots of competition coming in ... especially from Huawei."

Chinese players have also been coming up with new features that have created a distinction for the Chinese brands, said Kaur. "Consumers no longer feel that the Chinese players are just following what some of the global players, or what Apple is doing — but rather they are stepping up the game and creating their own new trends in the market."