It looks like the iPhone 8 is going to be fairly expensive. What are the implications?
Recently, on our TMO Daily Observations Podcast, the question was raised as to whether Apple can gain any ground on Samsung with its new iPhones to be launched in September. The answer may depend on the pricing.
Nowadays, customers have pretty much settled on their smartphone allegiance. Yes, there is churn—but it’s in both directions. Lately, Apple may have been getting the best of that, thanks to the Galaxy Note 7 battery fiasco.
At this point, I should note that there are many different ways of looking at the competition between Samsung and Apple, and it can be a great source of confusion. Possible metrics are:
- Samsung smartphone sales vs. Apple in the U.S.
- Samsung smartphone sales vs. Apple worldwide
- Android vs iOS share in the U.S. [which is very different]
- Android vs iOS share worldwide.
- Profit share for iOS vs all other Android devices.
A search of the internet will typically bring up charts for all those different numbers. They change a little over time, but never as dramatic as the demise of, say, Symbian and BlackBerry over the last decade. That was dramatic.
There are small gains to be made as Apple enters new, emerging markets. But Samsung is always ready to counter. What I’m interested in is something else.
How sensitive to price will be Apple’s success against the latest Samsung smartphones, like the Galaxy S8 and Note 8? One way to look at that is to see how the Galaxy Note 7 battery issues affected sales. Can there really be a dramatic event that can substantially affect sales?
Fortune reported that the answer is “yes,” and provided some numbers from market research.
My surmise is that Apple is faced with the same prospects. Although a steep price is not as dramatic as a safety issue, Apple has to be mindful that 1) Many iPhone 6 customers are ready for an upgrade. There are lots of them. 2) This flagship, 10th anniversary iPhone will be a coveted item and observers of all kinds will be quick to claim that an arrogant Apple has priced itself out of the market.
To balance that, this first ever OLED iPhone, according to reports, has been tricky to engineer. Supplies may be limited, and one way to manage demand would be to bump up the price just enough to give potential customers pause.
And so, I think that Apple has a real challenge facing it. The price will have to be set just right. There will be no such thing as grabbing market share from Samsung because each camp stands its ground. Feature comparisons will be made, but they’ll be irrelevant.
Apple will likely set its price smartly. The iPhone 7s and 7s Plus will fill in the gaps. Totals sales will be about as before, but up slightly.
Some will spring for this amazing iPhone 8 and possibly wait a little longer for delivery. Others will defer this cycle or select something more affordable. But, in the end, it remains a close race with Samsung. Very little can change that except an iPhone 8 pricing blunder by Apple.