Why the tech gi­ant un­veiled two mod­els, the 8 and X

Los Angeles Times - - FRONT PAGE - By Tracey Lien

The iPhone X, above, is tried out Tues­day. With the si­mul­ta­ne­ous un­veil­ing of it and the iPhone 8, Ap­ple has cre­ated a tiered sys­tem.

Do you want the new­est iPhone or the best iPhone?

Those two things are typ­i­cally one and the same, with Ap­ple’s lat­est phone be­ing sleeker, shinier and more pow­er­ful than those that came be­fore it. But with the an­nounce­ment of the iPhone 8 and the iPhone X on Tues­day, Ap­ple has cre­ated a tiered sys­tem: two phones, equally new, one of which is un­doubt­edly more pow­er­ful than ear­lier mod­els, and an­other even more pow­er­ful than that.

It’s a strat­egy that may con­fuse some cus­tomers, but one that makes sense for a com­pany re­liant on its f lag­ship gad­get to gen­er­ate rev­enue, an­a­lysts and busi­ness ex­perts said.

Start­ing at $999, the iPhone X is the most ex­pen­sive iPhone ever re­leased. It’s $300 more than the base model iPhone 8 — which it­self is more ex­pen­sive than Ap­ple’s pre­vi­ous high­est start­ing price for a base model phone.

The iPhone X has an edge-to-edge OLED screen, fa­cial recog­ni­tion technology and a dis­play more vi­brant and vivid than other mod­els. But its guts aren’t too dif­fer­ent from that of the iPhone 8 or the larger iPhone 8 Plus. Both phones have the same A11 Bionic chip, can sup­port aug­mented re­al­ity apps and can be charged wire­lessly us­ing Qi stan­dard technology.

That’s a big depar­ture

from the last time Ap­ple in­tro­duced a lower-spec phone: the iPhone 5c, which was un­veiled along­side the more so­phis­ti­cated 5s in 2013.

“The iPhone 5c was a ‘good enough’ phone for de­vel­op­ing mar­kets. It was to get into China, In­dia and Latin Amer­ica,” said Jef­fer­son Wang, a se­nior part­ner at IBB Con­sult­ing. “Here, the iPhone 8 is still the flag­ship phone. They haven’t bumped any­thing down. They cre­ated an ul­tra-pre­mium layer.”

It’s a strat­egy that could help reestab­lish Ap­ple as the pre­mium smart­phone brand. Ap­ple prod­ucts have tra­di­tion­ally been more ex­pen­sive than com­pa­ra­ble of­fer­ings from com­peti­tors, cre­at­ing a sheen of ex­clu­siv­ity that has led to higher de­mand from those who want the lat­est and great­est. But as the mar­ket for smart­phones has be­come sat­u­rated and once-emerg­ing mar­kets such as China have ma­tured, the iPhone has lost some of that sheen.

“Ap­ple’s in­tro­duc­tion of a $1,000 iPhone is con­sis­tent with its busi­ness strat­egy of dif­fer­en­ti­a­tion and ex­clu­siv­ity,” said Loizos Her­a­cleous, a pro­fes­sor of strat­egy at War­wick Busi­ness School. It’s “tar­get­ing the higher end of the mar­ket rather than just aim­ing for a larger base of users.”

The ap­proach also has to do with mar­ket ma­tu­rity. About three-quar­ters of Amer­i­cans own a smart­phone, ac­cord­ing to the Pew Re­search Cen­ter. When ev­ery­one who wants the lat­est and great­est phone has gone out, lined up and bought it, it’s time to reach the peo­ple who don’t care as much.

With the an­nounce­ment of the iPhone 8 and the iPhone X, Ap­ple did not in­di­cate that it would dis­con­tinue any pre­vi­ous mod­els. Which means the com­pany now of­fers the 2015 gen­er­a­tion of iPhone 6 and iPhone 6 Plus, the 2016 mod­els of the iPhone 7, the iPhone 7 Plus and the iPhone SE, and the 2017 mod­els of the iPhone 8, the iPhone 8 Plus and the iPhone X.

“That means they’ve got the widest range of prices and mod­els Ap­ple has ever of­fered, [and] they’ve cre­ated five tiers of phones start­ing at $350,” said Frank Gil­lett, a prin­ci­pal an­a­lyst at For­rester Re­search.

In other words, an iPhone for ev­ery­one — wealthy or not, early-adopt­ing fan­boy or not.

Hav­ing so many phones on the mar­ket com­pli­cates Ap­ple’s sup­ply chain, but the pric­ing strat­egy could help coun­ter­bal­ance ma­te­rial short­ages, Wang said. For ex­am­ple, the OLED screens in the iPhone X are scarce, which means Ap­ple might not be able to pro­duce enough to meet de­mand. Its pre­mium price in part could help re­strict de­mand un­til sup­ply ramps up. At the same time, Ap­ple wants lots of peo­ple us­ing its new aug­mented re­al­ity soft­ware, which is one of the key things that dif­fer­en­ti­ate its new­est phones from iPhones’ past and from com­peti­tors’ of­fer­ings.

“If they just launched the iPhone X and not ev­ery­one can get the X, they’ll have lim­ited their dif­fer­en­tia­tor,” Wang said. By equip­ping the iPhone 8 with sim­i­lar in­sides that sup­port aug­mented re­al­ity apps, it gives peo­ple ready for a phone up­grade an­other Ap­ple op­tion.

An­other thing the two new phones share: glass backs that en­able wire­less charg­ing. The com­pany isn’t sell­ing its own pro­pri­etary charg­ing dock. Phone own­ers will be able to use any charg­ing dock that sup­ports Qi wire­less charg­ing, which is the same stan­dard for Sam­sung de­vices. At its key­note event, Ap­ple an­nounced that it was work­ing on a charg­ing mat called AirPower, ex­pected to launch next year, that will si­mul­ta­ne­ously charge an iPhone, Ap­ple Watch, and AirPods.

Ap­ple also an­nounced that Ap­ple TV is get­ting 4K (it will cost $179) and that a new Ap­ple Watch comes with 18 hours of bat­tery life and built-in cel­lu­lar ser­vice — a boon to ath­letes who want to work out with­out tot­ing a phone (start­ing at $399, no cel­lu­lar pric­ing plan an­nounced).

Josh Edelson AFP / Getty Images

Josh Edelson AFP/Getty Images

PHILIP SCHILLER, se­nior vice pres­i­dent of world­wide mar­ket­ing, de­scribes the new iPhone X at Ap­ple’s head­quar­ters in Cu­per­tino, Calif. It has an edge-to-edge OLED screen and fa­cial recog­ni­tion technology.

Justin Sul­li­van Getty Images

AP­PLE Chief Ex­ec­u­tive Tim Cook, top right, shows off a new iPhone X dur­ing a me­dia event at Ap­ple head­quar­ters. Above, Philip Schiller, se­nior vice pres­i­dent of world­wide mar­ket­ing, in­tro­duces the smart­phone.

Josh Edelson AFP/Getty Images

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