iPhone: when will 'economy of scale' kick in (ie lower prices)?

[thermal]

Purchasing an iPhone from my cell phone provider costs $799 for the 32gb 3Gs.

The original 2G was $599 for the 8gb model.

Since much of the hardware seems similar generation to generation, you would think the capital costs for producing the iPhone have largely been absorbed. The cost to produce an iPhone should be significantly less now then it was two years ago.

So why is the iPhone not going down in price (as many electronics are)?

Is it:

a) persistently high component costs
b) R&D costs (seems unlikely as upgrades year-to-year are mildly evolutionary, not revolutionary)
c) Apple is in a monopoly situation and feels no need to lower prices, or
d) something else entirely?

 

[old-wiz]

... profit and what the market will bear.

 

[thelatinist]

Basic microeconomics. Like all price points, the iPhone's is set to maximize profit: any higher and decreased sales would lead to decreased revenues; any lower and increased sales would not make up fir the decreased profit on each unit. What's the point in asking why the price is set as it is? All prices are set the same way.

ETA: since the cost of making the iPhone is probably already about as low as it can get (it costs Apple well under $200 to make), the only thing that is likely to lower iPhone prices would be a decrease in iPhone demand. That doesn't seem likely any time soon.

 

[sidewinder]

Small devices, like the iPhone, are always getting updated with the newest micro parts with the most power and lowest power consumption. Batteries are the latest designs.

As long as they keep packing the latest technology in the space of an iPhone, don't expect prices to drop at all.

S-

 

[tedley]

All very good points made above, but the main issues is demand. iPhone sales are soaring at current prices, stores are having difficulty keeping inventories stocked. Why would Apple (or any business) reduce prices in such circumstances. Simply put, they don't have to. Units are selling at the current unit price, and nobody else is offering serious competition at the moment. You would see prices droop if sales drop due to demand or a rival product that grabs iPhone market share.

 

[Michael CM1]

A monopoly situation? Apple doesn't even have the highest smart phone market share, so how in the heck is it a monopoly? Do people complain about stuff like this on Lexus boards? If it's too expensive, don't buy it. If enough people don't buy it, the price will come down.

By the way, have you ever heard of signing up with a contract? $299 with AT&T for a 2-year contract for the 32GB 3GS.

 

[thegoldenmackid]

It's Apple. Economics need not apply, they do what they want.

 

[kate-willbury]

apple and low prices? what planet do you live on?

 

[alphaod]

It's Apple; when it's time to lower prices they discontinue the product and release an update.

 

[lollicup]

even with dozens of $300 netbooks at the local Fry's electronics , I was able to find a macbook pro laptop for over $2000

OP you clearly don't understand economics, or apple's sales model

 

[firewood]

Price is not related to cost (except that if the price goes lower than cost, the seller can go out of business.)

Price is related to what customers can afford, and how competitors price equal or better (in the eyes of the customers) products.

If enough customers have lots of money, and no other vendor creates a product more compelling than the iPhone, there's little reason for the price to go down, even if production costs magically go to zero.

In fact they could raise the price and make even more money.

 

[Morn]

It costs $500 for the 8GB and $600 for the 16GB 3Gs. That is the bill Apple gives to the carrier.
This is also about the cost of all smart phones, for example the droid is $560, palm pre $550, blackberry bold $600, Nokia N97 $571.
How the carrier charges you and makes that money back, is their choice.
So, I'd say what you want to wait for really, is for the iPhone to be on more carriers in your country, competition will drive down the price.
I mean, the cost of the phone is generally, a small part of what you're actually paying anyway.