With a $1K price tag, the iPhone crosses a threshold
WHEN Apple unveils its new top-of-the-line iPhone today, it isn’t just expected to offer features like infrared facial recognition and wireless charging.
The company will also enter new territory on price: The latest phone will start at about $1,000, compared with the $769 minimum for its current top phone, the iPhone 7 Plus.
“It’s a whole new threshold,” said Debby Ruth, a senior vice president at the tech consulting firm Frank N Magid Associates. “I really do think it’s going to make people pause.”
From the iPhone’s introduction a decade ago, Apple has always priced it as a premium product. But this time, the company is pushing into luxury territory. The phone will cost as much as the company’s entry-level MacBook Air laptop. “They’re doubling down on their strategy: They are going much more to the high end,” Ruth said.
Apple declined to comment before the product announcements scheduled for today. (On Saturday, Steven TroughtonSmith, a developer who combed through the iOS 11 software, found references indicating that the new high-end phone will be called the iPhone X.)
Investors are betting that Apple’s move up the price ladder will pay off with much higher profits, especially in mature markets like the US andWestern Europe, where many of the buyers will be people upgrading from older iPhones.
Apple’s strategy carries risks, however, especially in developing countries where smartphone sales are growing briskly but its market share is a blip compared to devices running Google’s Android software.
In Brazil, for example, Apple devices will account for just 8 percent of the 125 million active smartphone subscriptions this year, according to Forrester, a research firm.
Steep taxes, higher retail profit margins, and added costs from a botched attempt at building iPhones in Brazil have pushed the price of an iPhone 6s, a 2-year-old model, to more than $1,000 at Casa Bahia, a store in a Rio de Janeiro neighbourhood. In August, the retailer was selling Apple’s most basic smartphone, the iPhone SE, for more than $600, while a Samsung Galaxy J1 Mini was just $136. Still, the iPhone is coveted by wealthier Brazilians, many of whom buy the phone while travelling abroad to avoid their country’s high costs. “There will always be users in Brazil that will be interested in buying it,” said Tina Lu, a senior analyst with Counterpoint Research.
China’s reception to the $1,000 iPhone will be more crucial. The Greater China region, which includes Hong Kong and Taiwan, contributed $8 billion to Apple’s revenue last quarter, but sales have been sluggish.
Apple’s market share has declined slightly in China over the past year, according to Counterpoint. High-end phones from Chinese brands like Huawei and Oppo have gained ground, in part by undercutting Apple on price.
The new iPhone has the potential to reverse that trend. More than any other tech product, the iPhone has long denoted status in China. If a new iPhone looks the same as the previous one – and won’t be recognised by others as new – it often doesn’t sell well.
“If the phone’s appearance changes, I think people are going to be crazy about it, because we’ve seen the iPhone with a similar look for such a long time now,” said He Peihuan, a Shanghai-based financial analyst.