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Comment by jakobegger | Hacker News Reader

Can someone explain why Apple needs to make the iPhone more expensive when the Dollar rises compared to the Yuan? The iPhone is produced in China, most of the components are produced in Asia, etc. Their fixed costs per phone should drop when the dollar is strong. Sure, their margins might take a hit, but raising prices isn't going to help them sell phones...

Similarly, why doesn't the phone price drop in the US?

The only explanation I have would be that contracts with suppliers are all in USD, which would mean that the suppliers are the ones profiting from the strong dollar. Is that's what is happening?

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Labour might be priced in CNY, but most of the expensive bits in the BOM are from non-Chinese firms like Qualcomm, Samsung, and others and would be in USD denominated contracts most likely.

Apple almost certainly doesn’t hire the Chinese laborers directly. They do so indirectly through the likes of Foxconn.

And their Foxconn contracts are almost certainly dollar denominated. If anyone benefits from the strengthening dollar, it’s Foxconn, who likely gets the same dollars per iPhone, but those dollars get them more Yuan than they did before. They still pay their employees the same number of Yuan, which means they have more left over for themselves.

As a result, Apple’s iPhone costs remain the same in dollars, so they need to sell it at the same dollar price to maintain their margins, but that means the iPhone is more expensive for people in China buying in Yuan, or people in India buying in Rupees, or people in Europe buying in Euros, therefore reducing sales.

I believe you’re not considering the most obvious factor, which is that Apple has been raising devices price for a long time with huge success - so why not keep raising it?

Granted, there’s a breaking point and it may very well be this time, but if people are willing to pay for the increase in almost every new release then there’s no reason to stop doing it.

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