I respect your opinion, of course. And I was answering the comment regarding consumers nit-pickiness. But I, like others here, have been using Apple computers and devices since the 90s (and many here since late 70s, early 80s,) and I'm not liking their current direction. They are not crap, no way. But They are no longer "great" enough for me to wanna pay them the asking prices. A lot of people feel that way.
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Apple's Suppliers Aiming to Produce 75 Million New iPhones in Second Half of 2019
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I respect your opinion, of course. And I was answering the comment regarding consumers nit-pickiness. But I, like others here, have been using Apple computers and devices since the 90s (and many here since late 70s, early 80s,) and I'm not liking their current direction. They are not crap, no way. But They are no longer "great" enough for me to wanna pay them the asking prices. A lot of people feel that way.
I think the reality is that people will be holding on to their phones longer regardless of price. In light of this, higher prices, more accessories and more services seems like the right way forward.
That’s why we likely won’t see the iPhone design change too radically anytime soon. With lengthening upgrade cycles, it just isn’t worth it for Apple to keep revising it so radically, so I expect the current iPhone X form factor to be kept for a 4th or even 5th year.
Likewise, iOS is increasingly supporting features that extend the longevity of your device, such as that smart charging feature that comes in iOS 13. This seems in line with the reality that people are holding on to their devices longer, and Apple appears to be altering their strategy to accommodate this, rather than reverse it.
I think that when we see Apple’s earning reports next week, we will see that lower smartphone revenue will be somewhat offset by improved wearables, iPad and Mac revenue, and I expect that to be the new normal moving forward.
Don’t you think having higher prices just encourages more people to buy the previous years device at a discounted cost? I’m seeing that a lot and have adapted my buying choices to avoid paying silly money for a mobile phone. So little changes year on year with iPhones that you’re not really losing out by getting a high spec device from the previous year. Keeping prices high in my mind just limits your market and has done for Apple in terms of their flagship being popular.
Prices generally fell year on year when Steve Jobs was running the company. When a new product launched then prices were higher, but they fell the year after. With Tim Cook it is increasing every year without stopping.
Every iPhone since the beginning has improved every year yet they used to sell for cheaper or the same price point as the year before. When prices did start to increase it was more £50-£100, not £400 in a single year like the 7 to X. Apple still had to deal with all those issues you mentioned. What’s changed?
All of those points you listed would raise the price yes but Apple could choose to lower their profit margin slightly. Tims decision to start paying dividends means Apple is only driven by greedy shareholders now and the consumer is no longer the focus of the company.
Cars and phones are completely incomparable. A car has a big initial cost but that will last you 10-20 years or more if you look after it. It’s not designed to be a throwaway product like recent Apple products. There is hardly any user accessible parts inside an Apple product to upgrade it yourself.
The new Mac Pro still isn’t that ultimately customisable machine. I’d be happy to pay a big premium if Apple designed a Mac that was truly user upgradable over time with standard off the shelf parts.
My guess is - diminishing returns.
In the early days of the iPhone, tech was improving very quickly, so there was a clear, appreciable benefit when you upgrade from a 5mp camera to an 8 mp one, or when you go to a Retina display.
Today, when smartphones are increasingly “good enough”, the challenge now is to continue delivering meaningful improvements that make a noticeable benefit in the way we use our phones.
More MP in a camera isn’t necessarily going to let you take better photos. A higher PPI display just means faster power drain. Even more ram may not mean anything anymore.
As the smartphone matures, Apple finds itself having to invest an ever-increasing amount of resources for what are ever-incremental benefits. And Apple has clearly opted to go with non-spec-related improvements whose benefits are harder to quantify.
For example, a feature like Face ID took apple 4 years to integrate into their hardware. Force touch is the integration between a custom vibrator, software, and Apple’s clout in getting its App Store developers to support said feature. A lot of what Apple does involves tight integration between hardware, software and services, which often entails a lot more resources than simply adding more ram and calling it a day.
So I guess the simple reason as to why apple devices are costing more these days is that they simply cost more to design and manufacture. Could Apple lower their margins? Sure, but the simple fact that their margins have either remained constant or even decreased slightly shows that they are not simply raising prices for the heck of it.
I agree. Ever increasing prices are not the way forward and there's only so much price increase the market will bare. The end result of that is people hang on to their current smartphone longer, buy a cheaper model in the same brand, or buy a competing brand. The fact that the iPhone 8 (4.7") & iPhone XR represent approximately two-thirds of iPhone sales in the USA is a testament to that.
i actually hope apple does bad on sales, translates to better promotion offers for the customers.
I'm just not going to spend £1000 for a phone when I can get something just as good, and sometimes better on Android for half the price. It's like Windows Laptops, I can get better for a quarter of the price there.
Missed this yesterday for some reason.
I think there are people who want the best (iPhone) and will pay for it.
Second, I think it’s precisely because you can buy older iPhones at lower prices that Apple is able to sell their newest iPhones at the high prices that they do. Apple is not worried that consumers like yourself are priced out of the market because like you said, you are just going to buy an older, cheaper iPhone anyways. Which I assume is also cheaper for Apple to manufacture due to economics of scale and improved assembly costs.
Third, Apple has a few options like their iPhone upgrade program and improved trade-on values to make the price of a new iPhone more appealing, while ensuring a steady supply of 2nd-hand iPhones to sell to users looking for a cheaper alternative. In addition, the resale value of an older iPhone is buoyed by its good durability and long software support.
So if you ask me, while it sounds counterintuitive, a healthy 2nd-hand iPhone smart is actually helping to boost sales of the more expensive flagship iPhones, while also serving to increase the overall iPhone installed base (which in turn boosts Apple’s addressable market for accessories and services).
It’s not quite the best of both worlds, but it perhaps comes close considering what Apple has to work with these days.
I think Apple should be a little concerned though because people like me and most I know aren’t priced out through not being able to afford the best iPhone, but the fact it doesn’t offer much that an XR or older does not. I don’t think having 75%+ of your customers buying XR’s and older models boosts sales of the XS series at all. I think it just keeps sales healthy across the range while taking focus away from the device Apple really should be pushing for the majority to be excited about.
Last time I went to my local Apple store in the capital I was shocked at how small the presence was for the XS. It was reserved a small stand at the side of the store whilst the XR had the main tables through the centre and the back lit main advertisements. I asked a guy working there what the best seller was and he said XR and 8. I think the market for those wanting the best iPhone is there like you say, but it’s very small by comparison. The fact Apple have an XR and older models is keeping them relevant right now. People also keeping phones for 3 or 4 years is also hurting the industry greatly. Tim Cook has acknowledged Apple need to work on bringing costs down so I think it’s been more of a market experiment rather than a genius master stroke.
I am not sure what it is you think Apple ought to do. Further reduce prices?
On a side note, Aboveavalon has published their earnings estimates for Q3 and it expects revenue to be flat compared to the same time a year ago. In summary, a 13% drop in iPhone revenue is nicely offset by a bump in revenue from pretty much every other aspect (services, iPad, Mac, wearables).
Sounds like a company who knows what they are doing.
A flagship iPhone used to cost around £650-800, so I do think their higher prices can put people off. An upgrade used to be a no-brainer because you could do it at minimum cost. Now it’s a significant investment if you want the flagship and it shows as it has limited popularity. The XR is what is keeping the iPhone relevant right now and it’s priced sensibly. I’m not particularly worried about Apples earnings as it makes no impact on me as a consumer unless it forces a lower cost.
Which brings me back to my earlier point. That the iPhones are priced what they are partly because they do cost more to make.
As the smartphone matures as a product category, Apple finds itself having to pour ever more effort into what are increasingly incremental improvements in a bid to sufficiently differentiate themselves from the competition and justify that premium price tag.
Even if the Xr is the more popular model, I don't think it would make for good press if Apple were to release only the Xr. The XS Max represents the best that Apple has to offer for that year, and it's the standard against which all other smartphones are pegged against.
So what I see happening is that there will always be a super-expensive, top of the line flagship that sets tongues wagging, but it also spearheads innovations which eventually trickle down to other devices.
The Xr is not the phone we need, but the phone we deserve.
The market though isn’t any better I mean all the Samsung flagships are priced better but a maxed out note 10 Cupid be like 1600 and pixel are expensive for what they are
even one plus pro is priced higher than it was but still a good price. Prices aren’t low anywhere
it amuses me that Tim would say they need to work on bringing "COSTS" down, but not prices.
Apple could easily eat 2-3% of the the profit margins on the Xs Xs+ and still be one of the most profitable companies.
but that would hurt poor Timmies personal stock value... So clearly doing something to spur sales and encourage volume growth can never be considered over taking a percentage or two of his own value
They do cost slightly more for Apple to make and Apple are passing the marginal increase onto us to keep profits at a maximum which is fine, but it’s now split their user base. An iPhone XS costs Apple $395 to manufacture which is sold for $999 and an XS Max costs $443 and sold for $1100. So there’s a 60% margin on every single unit which is absolutely huge when sold in the tens of millions each quarter. Not many companies get away with that and I think consumers are starting to realise you don’t have to pay for the most expensive to get a device with an identical experience.
If Apple are fine with this going forward then I guess most are too. It keeps upgrades easier and draws attention away from the flagship devices IMO. If that’s the desired outcome then we’ll done Apple!
Those “estimates” are when the assembly line is rolling and doesn’t take into account any other cost associated with the design and support of those iPhones. I think quoting them like that is a bit misleading.
And you don’t think Apple has more data than you and yet still decides on this strategy?
Funny how people think they know better than the company executing. By the way, Apple has a pretty good (world class) strategy execution history.
It doesn’t take away from the fact there is an enormous mark up on every unit and we pay it because it’s a cool product. Apples profit isn’t my concern though, it’s the £1k and £1100 price tags on devices that instantly become redundant from my option list of upgrades. I’ll happily buy older or look at mid tier devices that offer the same experience. It frustrates me though when it’s suggested to save the dwindling market these manufacturers red to increase prices. Absolute rubbish, that’s a major reason why flagship phones are so unpopular! I think Apple set this trend with the iPhone X and others have followed, however it’s coming back to bite as mid tier devices dominate the mainstream market.
I’ve never made that statement. Everything you quoted was my opinion and obviously so. I am sure Apple are perfectly fine with the XR being their main seller and if so I am fine with that.
I understand what you're saying, but it's been reported the gross margin is about 38%. However, about the margin, one could say the same thing about any mass manufactured item and the basic cost of the materials. Yes, the max and xs is pricey and while I can't defend the prices, I can say the max was worth every penny. And fwiw, I also suspect Apple knew in advance the "mid-tier" models would dominate the sales.
Apple has gone on record stating that their gross margins is around 38%. This is an average and will vary from product to product, and likely includes intangibles such as iOS updates, as well as services such as iMessage and maps, which don’t generate any revenue for Apple.
I suppose we can debate whether this is a reasonable number, but it’s certainly a lot less than the numbers you quoted.
I couldn’t find anything that quoted 38% apart from two sources suggesting it’s between 38-45% based on guesses. Apple doesn’t publicise their R&D costs like most companies so it’s difficult to factor this in from guesses based on the BoM breakdowns and the like. Even the sources that do go with the lower figures seem to suggested Apple make around £500 clear profit per device which is huge. In the industry I work in, the products I design and put through manufacturing have around 10%, although admittedly are probably produced in a greater number than iPhones.
It’s brings around a choice though. I think the iPhones future lies with the XR, while it’s more expensive brother satisfies the niche end of the market for those who are happy to pay for minor increases in performance and, well I don’t know what else?
The highest end iPhone, so the XS Max 512GB at the moment should be £1000 anything else should be under that price point. There was no logical reason, other than greed, for the X to suddenly increase by £400 compared to the 7 just a year before.
The last time Apple had high prices and a stale product line up they nearly went bankrupt. They may ride it out for a while but if they continue to raise prices in the years to come they will get hit even harder in sales.