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Apple Inc. (NASDAQ:AAPL) High Price a Non-issue to Foreign iPhone Buyers

Apple Inc. iPhone 7 specs and rumors

Apple Inc. released its new iPhone 6S and iPhone 6S Plus a couple of weeks back and the new iPhones are holding the fort for the firm. The gadgets are already setting new records. Apple reports that it has sold more than 13 million units of the new iPhones in the first three days after their Sept. 27 launch. The devices are already on sale in some 10 countries, including China, and they will be on the shelves in 130 more countries by the end of 2015.

Apple Inc. iPhone 7 specs and rumors

Apple has hit another gold mine with its new iPhones. There are reports that the firm makes about a 217.4% mark-up profit on every unit of the iPhone 6S that it sells. Teardown analysis shows that the firm spends about $236 on each unit of the iPhone while it sells the device for about $650. In fact, Apple spends only $16 more on the iPhone 6S Plus, but the firm records huge margins from its sales.

iPhones costs more outside the U.S.

For all the high margin that Apple makes from its new iPhones, you’ll probably be surprised to find out that the device appears to be cheap in the U.S. in relation to its selling price in other countries. The Wall Street Journal has a video showing why Apple’s iPhone 6S and 6S Plus are cheaper in the U.S compared to other countries.

For instance, the 16GB iPhone 6S costs $650 in the U.S., it costs $720 in Turkey, it costs $875 in China, it costs $960 in India, and it costs $1,020 in Japan. In essence, the iPhone 6S sells for 10.76% more in Turkey, 34.61% more in China, 47.69% more in India, and 56.92% more in Japan.

The Wall Street Journal notes that the iPhones are pricey outside of the U.S. because of price moves due to Forex rates. Countries whose currencies are weaker than the U.S. dollar would usually find the iPhone pricey. Forex is not the only reason that keeps the iPhone 6S expensive outside of the U.S. For instance, the GBP is stronger than the USD at 1GBP to $1.53; yet, the 16GB iPhone 6S costs £539 or $822.7 in the UK.

WSJ says labor and land costs are other reasons the new iPhones have higher price tags in other countries. The cost of leasing store space, adverts, and marketing all eat into Apple’s profit margins and Apple does a very good job of passing those costs down to its loyal fan base. Import tariffs also vary across different countries and Apple has to pay those dues since it can’t have manufacturing plants in every country where it sells its devices. For instance, import tariffs could be as high as 24% in the EU.

Apple makes great phones, high price tag is not an issue

Apple sells its phones as premium-priced high-end smartphones and it doesn’t compete with other players in the smartphone space on the basis of its selling price. Hence, you won’t find Apple making a cheaper version of the iPhone because its brand depends on premium pricing for premium products.

Apple is able to maintain its high margins because of the quality of its phones. The firm makes about 92% of the profits in the smartphone space and it won’t stop making and selling pricey phones inasmuch as it can maintain its brand image.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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