The Dangers of a $1,000 iPhone
By all accounts, the 10th anniversary edition of the iPhone could be one of the most feature-rich smartphones ever launched. That, in turn, could mean that we’ll be staring at one of the most expensive consumer-grade smartphones to ever hit the market as well.
Apple has a well-documented history of charging a premium price for its products. And, depending on which side of the fence you stand on, you understand why the Cupertino-based company gets away with those high price tags. Beyond the beautifully crafted products themselves, the consumer is paying a premium for first-class service, reliable products, and the logo itself.
But if what analysts are predicting actually comes true, we could see the first $1,000 iPhone. (By some estimates, the device could even top $1,400.) And that’s incredibly dangerous territory not only for Apple, but also for the wider smartphone market and, of course, the consumer.
Why So Much?
With this being the 10-year mark for one of the world’s most important product introductions, Apple is expected to go all out. Beyond the standard mid-cycle launch of the iPhone 7s and 7s+, the company will likely roll out a special edition iPhone. Whatever the label (iPhone 8, iPhone X, iPhone Pro, etc.) the device is expected to include a slue of new features that will go well beyond what we see in a typical iPhone refresh.
Some of the predicted upgrades include a premium casing, 3D sensing technology, touch ID sensors, and (most notably) an OLED display. The latter feature is what’s expected to be one of the more expensive additions to the new device.
Screens are already one of the most costly components on a smartphone, and switching from the LED-backlit LCD display on the current iPhone to an OLED display is a major jump in price. According to industry analysts at UBS, current iPhone displays cost around $60 per unit, while the new OLEDs would run about $85 per unit.
Looking at the total cost of key components in the two different models, as estimated by UBS, the iPhone 7 Plus checks in at $192 while the iPhone 8 runs up to $263. And that’s just the top-level hardware. One UBS analyst told Business Insider that, based on their numbers, they expect the starting price for the special edition iPhone to come in somewhere around $850 to $900.
So, basically, there’s no getting around the fact that this new iPhone is going to be expensive.
Will it Flop?
The question that needs to be answered then is, ‘How will a $1,000 iPhone perform in the market?’ Will consumers actually be willing to fork over that kind of money for a smartphone that’ll only last them a couple of years at best?
There’s a couple of ways this could go for Apple: 1) It ends up being way too expensive and completely flops. Sure, some people—myself included—will be crazy enough to drop that kind of money on a new iPhone because it’s the 10th anniversary and because they just need to have the latest and greatest technology. Or, 2) it’ll be such an upgrade over the other iPhones to launch that it’ll turn into a tech unicorn—impossible to find (because Apple will limit production), leaving consumers chomping at the bit to find one in the wild.
It’s mostly anecdotal at this point, but at least one bit of data points to some serious struggles ahead for Apple.
What you’re looking at there is a chart from market research firm CLSA that shows the number of iPhone shipments broken down by the average selling price (ASP). Globally, Apple really hasn’t sold a phone that exceeded the $700 ASP mark. iPhone models with expanded memory capacity and the plus-sized screens made their way into the market in the past few years, but the sweet spot for Apple has been in the $700 price range. Suddenly introducing a phone that’s, on average, $300 above that standard would be sticker shock to most consumers.
But maybe it’s not total shipments that Apple is looking for here. Sure, they’re running the risk of producing a special-edition phone that will price some consumers out entirely. But with that price tag, they won’t need to sell as many iPhone 8s in order to hit higher revenue totals. Much like solid gold Apple Watch Edition, this iPhone could be a way to hit a higher-end consumer base with a product that helps drive revenue way up.
Driving the Competition Up
The one major concern a $1,000 iPhone creates is the sentiment throughout the rest of the smartphone market that it’s OK to launch a phone with that kind of price tag. There’s a very real possibility that we’ll start to see a smartphone bubble form.
For the consumer, this creates quite the conundrum. Signing a two-year contract with a cellular service provider could help them skirt around the high price tag. (Those carriers have long offered these contracts as a way to subsidize the cost of smartphones while putting the user in a position where they pay a higher price for service over those two years.) Or, the consumer could just shrug their shoulders and opt to pay the full price for the phone in order to save two years of their wireless lives. Or, there’s the option to “finance” the phone through those monthly install plans that carriers started offering recently. Those result in a contract-free plan, but you still end up paying for the full cost of the phone.
My guess is that most will decide the price is just too high for them.