Apple Slashes iPhone X Profit Margins Leaving Retailers Furious

Apple has reportedly cut the iPhone X’s retail profit margins in India by up to 30 percent, frustrating local retailers and large format chain owners.

Retailers in the country are not happy, claiming that Apple is reducing their cut of the iPhone X sales while itself profiting from the device’s large margins. Some outlets, such as Sangeetha Mobiles, have even stopped taking orders of Apple’s new flagship, the Economic Times reported last week.

“Apple has cut margins on the iPhone X from 6.5% to 4.5% for large retailers like us, and if a customer pays by card, which is usually the case, the margin reduces to almost 1.5-2%,” Sangeetha Mobiles Managing Director Subhash Chandra told the Times. The Bengaluru-based retailer has more than 400 stores across India. The CEO of another top Indian retail chain said that it would stop stocking iPhones at its more than 300 stores, partly due to the margins cut and the lack of control on retail pricing in various markets.

Chandra noted that Apple already offers some of the lowest margins to retailers. Industry sources reveal that other phone makers, like Samsung and Xiaomi, offer at least double the margin that Apple does.

The retailer frustrations come in the midst of a massive supply-demand mismatch in the country, as well. One handset retailer said it had only received 400 iPhone X units in the three weeks after the device’s launch — far less than what the company had originally promised.

That fact is leading some analysts that Apple should make India a higher priority, and start shipping more iPhone X units to the country. India is a critical market for Apple, being the second-largest phone market in the world. It’s also a region that Apple lacks a strong foothold in.

“India should rank very high on Apple’s priority index … it is yet to have a single owned and operated retail store in India,” said Manjunath Bhat, research director at Singapore-based Gartner.

Analysts at another research firm, Counterpoint, added that Apple’s “window of opportunity” will begin closing in the next few years if the company doesn’t start to expand its user base. Counterpoint added that Apple should not wait for regulatory, policy or business certainty in India — a fact that’s underlined by the company’s appeals to the local government.

Sources familiar with Apple executives’ plans countered, however, told the Times that India is a high priority for the Cupertino-based company. The sources claimed that Apple had gotten supplies of the iPhone X to India quicker than it had shipped them to other markets like South Korea and Thailand.

But while retailers may be frustrated at Apple, another local media report published on Nov. 26 suggests that the Indian government is pleased with Apple’s manufacturing initiatives within the country.

It’s not clear if similar margin squeezing is occurring in other markets, but data suggests that Apple may be making slightly less on the iPhone X than previous flagships due to its more expensive components.