The top-tier iPhone announced next week will most likely start at $1,000. Some analysts seemingly can’t fathom this, as they are scrambling to come up with a way Apple can ‘justify’ the cost of such a product, but they’re missing the point. Here’s one example in particular.
Denial and Bargaining
Jim Edwards for Business Insider:
Apple will unveil its next iPhone on Tuesday, but there is a problem: iPhone 8 (or iPhone Edition, or whatever it is called) may cost more than $1,000, or £760.
It’s only a problem if you don’t understand whom this phone is for and what it’s trying to accomplish.
Jim goes on to present a ‘solution’ from Barclays:
So how will Apple persuade you to pay even more for a phone that runs the same operating system as the one you may already be holding in your hand?
Barclays analyst Mark Moskowitz and his team think they have figured that out, positing that Apple could offer free subscriptions to Apple Music and 200 GB of iCloud storage for one year, a deal worth $156, to anyone who buys iPhone 8. That would bring the perceived cost of the phone down to a potentially more palatable $844.
Not a bad idea, but also incredibly un-Apple. They don’t even bundle in the 29W USB-C fast charger with the purchase of an iPad Pro. You really think they’re going to give away nice margins on services to millions of customers because the phone is more expensive? I seriously doubt it. It’s not their MO.
Furthermore, the iPhone 8 is rumored to be different from a UI/UX perspective, so even though it runs the same operating system as Jim says, it’s not the same experience.
Missing the point
The purpose of the iPhone 8 (or whatever it’s going to be called) isn’t to get into the hands of every existing Apple customer.
The device will have advanced components which are difficult to produce in the kind of mass quantity Apple is accustomed to for their normal iPhone line. For instance: 3D facial recognition sensors, including a possible laser assembly. OLED screens in general are difficult to produce, let alone a custom-shaped one. Just yesterday, Ming-Chi Kuo estimated Apple is paying Samsung between $120-$130 for each screen panel (compared to $45-$55 for an LCD screen).
Because of this, it’s completely unrealistic to have the same expectations for this phone as you would for a normal release. Apple simply won’t be able to produce the same tens of millions of phones per quarter anyway. It’s a moot point.
The iPhone for diehards
Here’s the truth: iPhone 8 will be for diehard Apple fanatics, early adopters, extremely heavy iPhone users, and those who must live on the bleeding edge of technology. It’s also for those who have more money than they know what to do with and just want the best damn iPhone.
This iPhone won’t be for your typical parents, friends, co-workers, or family members who come to you for advice on technology. They will be content paying the same price as they normally would for the regular update (i.e. 7S/7S Plus).
Why make an ultra iPhone?
Why the hell not? The people that will buy this phone won’t care about its price in the long run. Apple doesn’t lose anything by creating an ultra iPhone tier, as they know they can maintain the production run of the normal line (i.e. 7S/7S Plus any beyond).
Here’s a few excellent points from Jason Snell and John Gruber on this subject.
Now, it’s entirely possible that Apple’s apparent difficulties with its next-generation phone model are in part the fault of designers and engineers who bet that new technology would be available—at scale and at the prices necessary for Apple to maintain its profit margins—in order to ship this new phone in the fall of 2017. But it’s also true that most cutting-edge technologies are going to cost more and initially be available in limited quantities, unless Apple makes huge investments in equipment and manufacturing and corners the world’s supply of those parts, which it has done on more than one occasion.
If you want to argue that Apple should never create an iPhone with a higher starting price than what we have today, you’re implicitly arguing that Apple should never put any components into a new iPhone that can’t be made at iPhone 7 scale. I think that’s dangerous strategically, leaving Apple open to attack from competitors making premium phones with components (cameras, displays, new sensors, new battery technologies, etc.) that can only be produced in single-digit millions per quarter.
On the other hand, without question, this “new premium tier” strategy that I’m suggesting poses its own significant risk for Apple. The mere existence of the new edge-to-edge OLED iPhone could dampen excitement for the iPhone 7S and 7S Plus, leading to a decrease in overall sales. […]
Personally, I think this strategy makes sense, and arguably is overdue. In the same way it made sense for Honda and Toyota to create their Acura and Lexus divisions to sell higher-end cars without eroding the value or popularity of their best-selling Accords and Camrys, it makes sense for Apple to create a premium tier for the iPhone, the best-selling product the company has ever made and likely will ever make. But Apple won’t have the luxury (pardon the pun) of doing so under an Acura- or Lexus-like new brand. They’ll have to do it as Apple.
Extremely well said on both accounts. Furthermore, I just think an ultra iPhone would be bad ass (just please don’t call it iPhone Edition).