KUALA LUMPUR: The pace of upgrading to newer iPhones will continue to accelerate in particular among young working professionals and tech savvies in Malaysia, economists said.
However, the demand would be dependent on consumers’ income and their preferences to upgrade as well as the products’ affordability.
“With rising income, many consumers are likely able to afford higher-end phone models, while keeping up with the new trend and advancement in mobile technology,” said Sunway University Business School economics professor Dr Yeah Kim Leng.
He added that young working professionals would have the ability to keep up with the trend in owning mobile phones with advanced features as part of their lifestyle and followed by tech savvies.
Apple recently introduced three new iPhones – iPhone XR, iPhone XS, and iPhone XS Max with starting prices from US$749, US$999 and US$1,099, respectively.
Yeah said fierce competition among the global tech companies had triggered the California tech giant Apple Inc to continuously upgrade its products, particularly the iPhone with advanced technology features.
He said this was to maintain Apple’s customers based in line with the increasing sophistication of the products from other rivalries such as Samsung, Huawei and Xiaomi.
“The phone industry is a very dynamic sector due to increasing competition and technological advancement as well as sustained demand (rising income) from consumers,” he said.
On the other hand, Yeah believes the older generation consumers perceived mobile phone as the basic tool of communication and not to the extent of adapting to the latest advanced features.
“They wouldn’t feel the need to keep up with the trend. They tend to own a phone that is able to meet their basic needs, equipped with features that they have already accustomed to,” he said.
Asked on how the Sales and Services Tax (SST) would affect new iPhones sales, Yeah said it was likely be dependent on the tax rate imposed on the products.
“The manufacturers might pass the entire five per cent or 10 per cent tax on the products to consumers.
“The extent to which it passes through dependent on their pricing powers, which is based on market condition and demand for particular product as well as the affordability to purchasers,” he said.
Yeah said manufacturers would have to take into considerations before setting the price, noting that the taxed products were not shown in the receipt but rather the services were shown for SST.
“We foresee the SST will not dampen the sales of new iPhone in Malaysia but the demand will depend on the price differential with phone of other brands that have similar features,” he said.
Bloomberg Intelligence (BI) senior industry analyst John Butler and associate analyst Boyoung Kim said Apple's higher-priced iPhones would help drive growth in iPhone revenue through higher average selling prices (ASP).
“We believe consumer demand will be strong for the new high-end iPhones despite their lofty prices, based on the popularity of the US$1,000-plus iPhone X models that accounted for 27 per cent of iPhone shipments from fourth-quarter (Q4) of 2017 to second-quarter (Q2) of 2018.
“We also expect ASP-driven iPhone revenue to be constructive to Apple's gross margin, earnings and cash flow,” they said, adding that the three new iPhones should spur strong upgrade activity in developed regions.
BI telecoms analyst Richard Bourke said Apple's dominance in the premium smartphone segment will likely face an increasing threat from Huawei, as the Chinese rival introduces more high-end models.
Apple ranked third globally with a unit share of 12.1 per cent in Q2, falling out the top two for the first time in eight years, as Huawei's units grew by 41 per cent despite an overall market decline, according to International Data Corp.
The information services provider said Huawei’s gain came at the expense of Samsung, as its April launch of the P20 series likely attracted high-end consumers away from the Galaxy S9, released in late March.
“We expect the pressure on Apple from Chinese vendors to intensify. While Xiaomi and Oppo have been focused on low-end phones to drive growth in emerging markets, they will likely expand their high-end offerings to build share in developed markets, which could chip away at Apple's high-end dominance,” he said.