Since the announcement of the Apple iPhone X, the device has been described as a luxury item, a phone for the rich, etc. It is Apple’s first smartphone to break the $1,000 barrier. So, it came as a surprise when Apple CEO Tim Cook said the 10th-anniversary iPhone was a bargain. It’s hard to believe, but Cook may have a point. The 64GB iPhone X costs $999 and the 256GB version is even more expensive at $1,149. The price goes up to $1,500 in countries like India, Russia, and the UK.
Tim Cook wants you to believe that $999 is ‘a value price’
One good thing about the Apple iPhone X is that it will launch in November, and will probably remain in scarce supply until early 2018. It means you still have a few months to save up if you are salivating for the handset. Tim Cook, who just a few days ago said the iPhone X was the ‘future’ of smartphones, wants you to believe that $999 is “a value price.” If you buy the 256GB model, the $1,149 is also “a value price.”
Responding to a viewer-submitted question on ABC’s Good Morning America, the Apple CEO said (around 6:10 in the video), “It’s a value price, actually, for the technology you’re getting.” Though the viewer’s question was whether Cook thought the iPhone X price was out of reach for most Americans, he didn’t directly address the question. Instead, the Apple CEO pointed out that fewer people today pay the entire amount upfront.
Most buyers are paying for their iPhones over long periods. A variety of trade-in programs, installment deals, and carrier subsidies make the device more affordable. Cook added that the iPhone had become an essential part of our daily lives. People want their iPhones to do more and more. So, the company added more and more technology to meet their expectations.
Wireless carriers including AT&T, Verizon, Sprint, and T-Mobile offer trade-in programs that allow you to get credits towards the iPhone X purchase if you turn in your old smartphone. Retailers such as Walmart offer similar deals. Apple itself has an iPhone Upgrade Program that allows you to get the iPhone X for about $50 per month, along with the option to get the 2018 iPhone when it comes out.
During the interview with Good Morning America, Cook said Apple never intended to sell the most of anything. Notably, the iPhones are the top-selling smartphones in the US, according to Kantar Worldpanel. Coming back to the ‘value price,’ the iPhone X does offer significant upgrades compared to previous models. And if you want an affordable device, you can go for the iPhone SE, iPhone 7, or 7 Plus. The iPhone 7 and 7 Plus have received a price cut.
The cost of iPhone X components is more than twice that of the iPhone 7
A report from Susquehanna International Group could help explain why the Apple iPhone X costs $1,000. The research firm points out that the iPhone X component cost is $581. It doesn’t include the cost of assembly, marketing, employee salaries, R&D, administration, retailing, and patents. If you add these costs, Apple’s profit margins on the iPhone X aren’t going to be that high.
By comparison, the iPhone 7’s component cost was $248, and it was selling for $649. It means the iPhone 7 gave Apple a gross margin of 61.78% before assembly. The same for the iPhone X is just 41.84%. The actual profit margin figures will be much lower than that. At least from that perspective, the iPhone X’s $999 appears to be “a value price.”
iPhone X has enough new technologies to justify the price tag
The iPhone X is jam-packed with exciting new features. It sports a new design with a bezel-less 5.8-inch display and a glass back. There is no home button and Touch ID fingerprint sensor. Apple has introduced a new Face ID to verify your identity in split seconds and authenticate payments via Apple Pay. It features a vertical dual camera system on the back. The tech giant has added a new feature called Portrait Lighting in both front and rear cameras.
The iPhone X supports wireless charging based on Qi standard, and fast-charging technology. The device is powered by an A11 Bionic processor. Recent benchmark results show that the iPhone X is far more powerful than any Android smartphone on the planet. The phone will be available for pre-order on October 27 and go on sale a week later on November 3rd.
iPhone 8 gets a lackluster response
Consumers are more excited about the iPhone X than the iPhone 8 and 8 Plus, which were unveiled at the same event last week. The iPhone 8 and 8 Plus, which look similar to last year’s models, became available for pre-order on September 15. They will hit the store shelves this Friday. Reports from wireless carriers suggest that demand for the iPhone 8 and 8 Plus has been disappointing at best as customers wait for the iPhone X.
A report from KGI Securities analyst Ming-Chi Kuo says when a new iPhone goes on pre-orders, the demand tends to be so strong that there is a 3-6 weeks of shipping delay. But for the iPhone 8 and 8 Plus, the availability window is only 1-2 weeks. Depending on the model you want, you might get your handset on the launch day itself if you pre-order it online.
Apple iPhone X supply shortage to test the limits of consumer loyalty
Kuo said in an earlier research note that there will be a huge gap between demand and supply of the Apple iPhone X. Consumers are excited about the device, but Apple will unlikely be able to meet the demand through the holiday shopping season. The analyst predicts delivery dates for most buyers will be pushed back to 2018. Apple was producing only 10,000 units of the anniversary model per day.
The KGI Securities analyst told investors that the production issue was due to OLED panels. Apple is sourcing OLED screens from Samsung Display. The tech giant is also in talks with LG Display to ramp up production.
Though the euphoria for the Apple iPhone X is expected to be on a whole new level, it will face stiff competition from Android devices. Samsung’s Galaxy Note 8 has been well received in the market. Google is set to launch its Pixel 2 next month. LG has already launched a new V30. All of them are slightly more affordable than the iPhone X. If the iPhone X faces severe supply shortages as Kuo predicts, many buyers could switch to Android.