Apple's New Top iPhone Pushes Up Price — WSJ
Sep 13, 202301:32 GMT+2
By Aaron Tilley
Apple unveiled a new iPhone lineup aimed at wringing more money out of its top model without jacking up prices for more basic versions that are getting only minor upgrades.
The Cupertino, Calif., tech giant showed off an iPhone 15 lineup at a company event Tuesday that featured largely incremental improvements, including better cameras, improved battery and new software features. For pricier Pro models, Apple is offering a new titanium case to make the phones lighter and a screen that pushes further out to the edges of the device, among other advances.
The iPhone 15 Pro Max will start at $1199 for a version with 256 gigabytes of memory. Apple said it's the same price as last year's Pro Max model with the same storage, but the company effectively raised the minimum price for the Pro Max by $100 by eliminating a lower-price 128-gigabyte model.
Apple shares closed down 1.7% Tuesday after the announcements. The stock had gained 38% this year through Monday's close despite some recent weakness, outpacing the Nasdaq Composite index.
Some investors had been hoping for price increases in the base model phones to grab more margin, said Brian Mulberry, client portfolio manager at Zacks Investment Management, an Apple shareholder.
"Apple is sensitive to the fact that the strength of the consumer is starting to wane," said Mulberry. "It seems to be tactically right to be accessible, but also to stretch margins for higher-end phones."
The Pro models do away with the mute switch found in every phone since the first model. In its place, Apple now offers a customizable button to quickly pull up the camera or certain apps.
The Pro models are powered with a chip, called the A17 Pro, built on the new 3-nanometer fabrication process from Taiwan Semiconductor Manufacturing.
The Pro camera system also gets a bump, especially in the larger Pro Max, with a camera able to zoom up to five times for taking pictures from a long distance. The Pro models also can capture 3-dimensional video that can be viewed later on the Apple Vision Pro, the company's headset that won't be available until early next year.
Apple is hoping these advancements are enough to keep sales up, even as the smartphone market cools. Global smartphone shipments are expected to decline 6% annually to 1.15 billion devices by the end of 2023, the lowest smartphone shipment figure in a decade, according to Counterpoint Research. Apple, nevertheless, is positioned to potentially take the top spot in smartphone shipments from Samsung, the research firm said.
The practice of enticing more consumers to buy its Pro segment of iPhones, which it introduced in 2019, has kept Apple sales climbing. Since 2019, the company has boosted iPhone revenue by more than 44%, despite shipments only advancing 15% in roughly the same period, Counterpoint Research said.
The iPhone still accounts for around half of Apple's overall revenue. For the company's most recently reported quarter ended July 1, iPhone revenue declined 2.4% to $39.7 billion, missing analysts' expectations.
China — Apple's third-largest market — has become a source of greater uncertainty for the company. In recent weeks, Chinese authorities have instructed government staff not to use iPhones in the workplace, The Wall Street Journal reported last week. Beijing also expanded the iPhone restrictions to cover business purposes at state-owned companies, including workers in the space and energy industries.
China's Huawei Technologies also recently announced its re-entry into the country's high-end smartphone market, which Apple dominates. Huawei had fallen away as an Apple competitor in recent years following Western sanctions on critical chip technology, but Huawei made a surprise return with high-end models that featured homegrown technology for fast wireless speeds.
The combination of these two problems for Apple coming from China has raised concern for investors, sending Apple shares 6% lower last week and wiping out around $190 billion in market value.
The base models of the iPhone 15 will include a number of features found in last year's iPhone 14 Pro. The iPhone 15 will start at $799 and the larger iPhone 15 Plus will start at $899, the same pricing as last year's iPhone 14 base models.
The big improvements to the camera in the iPhone 15 base model — jumping to 48 megapixels from the iPhone 14's 12-megapixel camera — could entice users with older phones to upgrade, said Francisco Jeronimo, a vice president at market researcher IDC. The firm estimates that 60% of Apple iPhone users have a phone that is four years old or older.
"Apple is tackling the long tail of 600 million iPhone users out there that will be due to upgrade at some point," Jeronimo said.
IDC expects Apple to sell 150 million of the new iPhones in the first 12 months, similar to last year's cycle.
Perhaps the most consequential update for consumers is found in all of Apple's new products. Apple is moving its iPhones to the USB-C standard connector port, doing away with its proprietary Lightning connector that was introduced into the iPhone 5 in 2012. Apple is complying with new European regulations, which it initially opposed.
With the change to USB-C, Apple is moving more in line with a common connector standard found in many consumer devices these days, including rival Android phones.
In the iPhone 15 Pro, Apple's A17 Pro chip enables the USB-C port to support transfer speeds up to 10 gigabits per second, Apple said.
Apple also introduced two new Apple Watches, the Series 9 and its bigger, more sports-oriented Apple Watch Ultra 2. Both watches feature a new chip, called the S9, that speeds up AI processing in the watch, Apple said. The chip allows users to speak to Siri voice assistant and access health data on the device instead of being shipped to the cloud.
The new chip also enables a new way of interacting with the watch that Apple is calling Double Tap, where the user double taps their index finger and thumb together to do quick tasks such as pick up a phone call or turn off an alarm.
Apple also claims the new Apple Watch is its first ever carbon-neutral product. The company said it would no longer be using leather in its products, such as Apple Watch watch bands, citing environmental concerns.
Write to Aaron Tilley at
aaron.tilley@wsj.com
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