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Transcript

00:00:00
>> Apple is facing a new threat from mid-priced Chinese smart phones that are catching on all around the world. I'm Stephen Nellis with Reuters in San Francisco. These days, Apple has two big business imperatives, number one, become a services company making money off things like app or music, which means that it needs to have a many users as possible.
00:00:20
But number two is making the latest and greatest phones which means extremely high prices. Those two goals aren't really compatible, so the way that Apple has tried to split the difference is by selling mid-priced phones like the iPhone 7 and the iPhone 8 that are supposed to be a way for people who want to try out the Apple ecosystem, but are put off by those high prices of more than $1,000 a phone.
00:00:42
But here is the problem, in the past few years a new group of Chinese smartphone makers, specifically Xiaomi, Oppo and Vivo have risen up and started to take a bite out of that mid-level of the business. They're selling phones that cost somewhere in the vicinity of some of those older iPhone models and have very attractive specifications and designs, they're attempting people to take a look.
00:01:07
Now here's why this is a problem for Apple, the company has held the line on prices. It does not want to come down and compete in the low end of the spectrum. And instead, they're asking people, hey, buy a used iPhone, or take a look at these older models and a lot of people in countries like India, like Brazil, like Russia are looking at those older iPhone models and then looking at these Chines smartphones and saying hey, you know what, some of these features are pretty compiling for about the same money that I would pay for yester years iPhone model.
00:01:39
But here's Apples response, they have unparalleled levels of customer satisfaction and loyalty. When people do eventually buy an iPhone, they do tend to end up liking it and sticking with the iPhone. So Cupertino is hoping that when customers finally do make it to an iPhone, they'll hold onto it for a long time and be a reliable customer for additional services like iCloud or Apple Music.