iPhones in China to become even more expensive following currency devaluation

iPhones are already the most expensive smartphone in China but they are very likely to get even more expensive very soon. Following the decision by the Chinese government to devalue the yuan by 1.9% in the wake of weak exports, it is inevitable that Apple will pass on the loss in revenue to customers by raising the price of their already expensive smartphones.

China is fast becoming Apple's most important market. As the US and Europe reach saturation point and growth slows, the huge Chinese smartphone market is one that Apple is focusing its attention on. China is already the company's second biggest market in terms of revenue, generating $13.2bn (£8.5bn) in the three months to the end of June. Apple CEO Tim Cook has even said he expects China to become the company's most important market in the future.

The flip side of the importance of the Chinese market for Apple is that when something like the currency devaluation happens, Apple's share price takes a hit, dropping over 5% on Tuesday following the announcement.

Significant volatility

Apple flagged up the potential for problems with currency fluctuations in China back in September in its annual report, saying: "There is a risk that the company will have to adjust local currency product pricing due to competitive pressures when there have been significant volatility in foreign currency exchange rates."

The iPhone 6 currently costs CN¥5,288 in China, which translated to $865 before the devaluation, but now translates to $821, which is a significant enough drop to force Apple's hand and increase the price.

The iPhone in China cost over $200 more that an iPhone in the US where it is priced from $649, yet Apple has been able to leverage its brand power to get Chinese customers to buy its phones in their millions seeing the item as a status symbol as much as a communication device.

Apple has yet to comment on the possibility of a price increase, however, when you consider that last year Apple hiked the price of the iPhone 6 in Russia by 35% following the collapse of the rouble, then we can expect the company to act in a similar fashion in China.