iPhone Sticker Shock

exploding-head

December 10, 2018

This past week a friend and I agreed we should go see a movie, but neither of us knew what was in theaters. We decided to look at our options on his iPhone. When he pulled out his phone, I noticed that the entire screen was cracked to the point that you could hardly read what was on the screen. I asked why he had not repaired or replaced it yet, and he explained that he had lost his previous iPhone, and just recently bought the one with the now smashed screen. He was not willing to dip into his pocket again so soon after spending over $500 on a phone that only lasted a month before he dropped it.

Unfortunately, I can relate to his predicament. I found myself in a similar situation when the home button on my iPhone stopped working. I resorted to the “assistive touch” feature for a year before I purchased a replacement.

IPhones are now a big-ticket item, and with each new model having a higher price. The current price of iPhones with the standard amount of storage is $449 for an iPhone 7, $569 for an iPhone 8, and $749 for the most recently released iPhone XR. At the high end are the XS models with more storage and larger screens, and a cost of $1,150-$1,450!

In the early days of the iPhone, each new version offered dramatic increases in speed, storage, and camera quality that justified an increase in the price. However, since the iPhone 6, newly released models have not offered much more the previous ones. Without the innovations that consumers had come to expect, there has been less desire to spend so much money on an item that is frequently lost or broken. These sentiments have led to decreased sales. It is no coincidence that Apple has recently decided to stop providing unit sales data; a move which has been widely criticized and calls into question the company’s own confidence in its ability to meet target quarterly sales volume at current prices.

Apple’s decision to cut the price of models 7 and 8 by 100 dollars is further evidence of the downward pressure on prices. An even more striking indicator of the drop-off in sales is seen in information provided by some of Apple’s largest suppliers. For example, Largan Precision, the maker of the iPhone camera lens, saw its November revenues down 29% from last year. Foxconn, the company who assembles iPhones has announced a 2019 plan to cut expenses and lay off 10% of non-technical staff in anticipation of “a very difficult and competitive year”.

I do not doubt the ability of Apple to read and react to the market. I expect that they will soon provide a more affordable phone which still generates a healthy profit margin. But for now, the fact remains that consumers will be reluctant to pay an increased price for a phone that does not offer a commensurate benefit over the previous model.

Corey Erdoes

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