Apple would like you to know that its costliest phone, the R20,000 XS Max, is not pronounced ‘excess’

● Apple has unveiled its most expensive iPhone to date, alongside a new, higherpriced Watch with additional medical features, as it seeks to continue revenue growth from its flagship products.

A trio of new smartphones revealed on Wednesday includes the $1,099 iPhone XS Max (which is expected to retail in SA for more than R20,000), its largest and most expensive smartphone, with a 6.5-inch display.

An updated version of the 5.8-inch iPhone X — to be called the iPhone XS (pronounced “ten S”) — will cost $999, the same price as its predecessor, despite some analysts predicting a price cut.

Apple also added the new iPhone XR to its product line-up, offering an aluminium casing instead of the XS’s steel, and a 6.1-inch LCD screen.

But despite CEO Tim Cook’s pledge that the XR would “introduce the future of the smartphone to even more people”, its $749 starting price is $50 more than the entry-level iPhone 8 when it launched a year ago.

“The introduction of the iPhone XR challenges convention by offering a larger display at a cheaper price point than the iPhone XS,” said Geoff Blaber, analyst at CCS Insight. “Apple continues to break all the rules when it comes to consumer electronics pricing.”

At the same time, the two-year-old iPhone 7 will now sell for $449 and the iPhone 8 for $599, each $100 less than last year.

“It’s clearly the best lineup we’ve had by far,” Cook said. “At Apple we are always pushing our products forward and making technology more personal.”

Patrick Moorhead, analyst at Moor Insights & Strategy, said Apple “did enough . . . to keep its smartphone growth going until the competition responds”.

The iPhones were unveiled alongside a new Apple Watch, which also saw price increases. The Series 4 model with cellular connectivity starts at $499, $100 more than its equivalent a year ago, as the smartwatch added a new medical-grade electric heart rate sensor that has been approved by US regulators.

Price rises have formed a key part of Apple’s revenue growth story in the last year, allowing it to increase revenues despite slower increases in unit volumes.

To justify the higher costs, Apple is packing in ever more technology to the iPhone XS, including the new A12 Bionic chip and support for dual sim cards, as well as a new gold finish.

The A12 is the first seven-nanometre chip to make it to market, beating semiconductor rivals such as Intel. As well as making features such as facial recognition run faster and boosting overall performance, the new chip will improve photos from the iPhone cameras, which also have improved image sensors.

Steven Sinofsky, a former Microsoft executive who is now a venture capital tech investor at Andreessen Horowitz, said on Twitter that the A12 showed Apple was “the leading chip innovator and creator in the world”.

The lower-cost iPhone XR will also include the latest A12 chip and dual sim support, with the cost of the device brought down by the aluminium casing, single-lens rear camera and LCD display.

Support for dual sims will allow customers to use two phone numbers or two calling plans in the same device. To achieve this, Apple is bringing electronic sim cards, previously used in iPads and Apple Watches, to the iPhone for the first time. Mobile operators including AT&T, Verizon, Vodafone, EE and Deutsche Telekom will support the esims.

However, it is producing a special model with physical dual sim slots in China, where regulation of telecoms operators is more onerous. Last year, Apple was forced to suspend the cellular feature on its new Watch Series 3 in China just weeks after it went on sale.

The launch of three new iPhones this week was a powerful indicator of Apple’s intention to retain its status as the world’s most valuable company.

The iPhone XS Max is already nicknamed the “Excess”, not only for its massive 6.5-inch screen, but also for the price tag, which will range from $1,099 (about R16,340) upwards, depending on the storage option. It will have one of the highest profit margins of any phone, in line with Apple’s strategy of premium pricing. This is how, despite dropping to No 3 behind Samsung and Huawei in sales volume, Apple remains the most profitable handset manufacturer in the world.

In SA, with shipping, taxes and margins, the phone will cost well more than R20,000.

From time to time, Apple acknowledges that iPhones are too expensive for all who aspire to own one, and comes up with a more affordable model. The iPhone 5c, launched in 2013, was the first attempt at a “nonpremium” phone. It was regarded as a flop, selling a third as many units as its slightly more expensive 5s. CEO Tim Cook admitted Apple had overstocked on the cheaper model.

Fast forward to 2018, and Apple is at it again, launching the iPhone XR this week, targeting a lower-end market. But only slightly lower-end. Like the 5c, the XR comes in a variety of bright colours, aimed at the youth market. It has a large 6.1-inch display and hosts much of the same technology as its more expensive siblings.

Philip Schiller, Apple senior vicepresident of worldwide marketing, repeated the same mantra as that for the 5c: “iPhone XR makes it possible for even more people to have the great experience of the latest iPhone X technology, in beautiful new designs, at a more affordable price.”

And there’s the rub. More affordable means $749 upwards, depending on the configuration. The middle phone in the new series, the iPhone XS, starts at $999. That puts the cheaper phone in the R12,000-plus range once it lands in stores in SA. In other words, affordable only to those who already buy high-end phones.

In this way, the “cheaper” iPhones symbolise the digital divide between developed markets and emerging markets. In countries such as SA, the iPhone is affordable only to the elite. That is no longer a small elite: in any conference aimed at corporate delegates, ask how many in an audience use an iPhone, and anywhere from a quarter to half the audience will put up their hands.

In the overall market, however, this proportion falls to less than 5%. That’s compared to a US share of well more than 40%. This reveals the extent to which the overall US market for Apple is equivalent to the elite market in SA. That is the shape of the digital divide between the two countries, and the shape of the divide between Apple’s perception of what is affordable and the perception of ordinary people. Even in the US, as the 5c showed, the XR may well fall short of market needs.

Yes, a few more people will have the Apple experience as a result of the “lowend” iPhone, but don’t expect it to change the market.

In SA, with shipping, taxes and margins, the phone will cost well over R20,000