The surest way to get attention is to proclaim that the most desirable iPhone of all time, Apple’s 10th anniversary edition, won’t be affordable. Oh, and by the way, that will cause Apple to fail. It’ll be the iPhonepocalypse. OMG. Read all about it!
I”ve never believed that for a second, and neither does Mark Reschke at Two Guys and a Podcast. In this sober and well researched article of the week, author Reschke argues persuasively that iPhones have always broken new ground and added new features without raising the price. Here’s the link.
Looking at History
Author Reschke did his homework and listed all the iPhones of the past that introduced new features but didn’t incur any increases in price. Here are just two excerpts:
– iPhone 4 stunned the market with it’s industry leading Retina Display, higher resolution rear facing camera and included iPhone’s first-ever front facing camera, packaged in an all-new glass front and back. Yet no price increase over iPhone 3GS, while packing more new and upgraded technology into an iPhone versus any previous model.
– iPhone 6 delivered what may be Apple’s biggest technology upgrade in iPhone’s product history with two new larger sizes of iPhones (iPhone 6 and 6 Plus). Not only did the display grow in size with both iPhones, but they incorporated NFC for Apple Pay, along with higher resolution cameras for high quality video and photos, an upgraded Touch ID, M8 Motion coprocessor, and optical image stabilization for iPhone 6 Plus. iPhone 6 had, wait for it… no price increase. iPhone 6 Plus was the largest iPhone ever and marked the first time Apple charged more than previous models to the tune of $100.
What’s at Stake
Apple knows what’s a stake, and Apple knows all the elements that go into iPhone pricing. There’s 1) price elasticity, 2) market saturation, 3) the number of people ready to upgrade after a two or three year cycle, 4) perennial competition from Samsung, and 5) the glitz and charm associated with a new, 10th anniversary iPhone that will have some nifty new features. To price this iPhone dramatically more than comparable products from Apple and the competition would be suicidal. And be very unusual for Apple.
IHS has told me that in the kinds of display sizes used for smartphones, OLED displays cost about the same as traditional LCD displays. So what’s left? These small components, sensors, cameras, lasers, inductive circuits used in the iPhone tend to cost a few dollars each. Each new iPhone achieves economies of scale so that as legacy parts drop in OEM cost, new technologies can be added with little impact.
For example, the bill of materials (BOM) for an iPhone 7 comes in at US$224.80 and sells, at retail for $649.00 (32 GB). Practically, for Apple to sell an iPhone 8 for $1200 to $1400, the BOM would have to more than double. That’s not going to happen unless Apple stuffs the inside with cut diamonds.
Author Reschke concludes:
So what’s driving all this $1,400 iPhone mania? Well, it may be all too obvious an answer… click bait. So rest easy, I wouldn’t expect iPhone 8 to cost anything more than $749 for the base model.
Next Page: The News Debris For The Week Of July 17th. Working for then leaving Apple.