Apple’s special event took place two days in California amidst the usual flurry of product announcements and as expected the reviews have started pouring in. But one standout thing is that it looks like Apple is beginning to realise something analysts have been saying for some time.
Apple announced the iPhones 11, 11 Pro and 11 Pro Max and surprisingly the prices were lower than the previous versions, the iPhone XS and XS Max. The iPhones iPhone 11 Pro and Pro Max come with a new triple-camera setup, featuring a regular, telephoto, and ultra-wide shooters. The iPhone 11, 11 Pro and Pro Max, of course, feature the latest and greatest Apple system chip, the A13 Bionic, which, in addition to providing 20% increased CPU and GPU performance and being more power-efficient. The A13 Bionic is more power-efficient than its A12 predecessor, allowing for up to 1 hour longer battery life with the iPhone 11, compared to the iPhone XR.
But with all of that, the 64GB iPhone 11 entry price is cheaper than even the “budget” XR and it’s still surprising to some. The iPhone XR was launched around this same time last year at $749 for the 64GB model but was later reviewed downwards to $699. The new price is even $100 less than the Google Pixel 3 whose launch price was $799.
On top of that, the The 5.8″ iPhone 11 Pro will start from $999, while the iPhone 11 Pro Max’s base configuration will cost $1099 basically the same price as the iPhone XS and XS Max as the time of launch.
But Apple began this trend quietly in 2017 when they launched a $329 iPad which when compared to the previous models of $599 was quite a price knockoff. It’s 7th Generation iPad is a 10.2-inch 2160×1620 “Retina” display, up from the older model’s 9.7-inch panel, and an A10 Fusion chip and comes in at $329 while education customers will be able to get it at a slight discount of $299.
Then on the services side, Apple announced its Apple TV+ with a trailer of the Jason Mamoa led SEE. Apple TV+ is hitting more than a week earlier than Disney Plus and it’s also going to cost $2 less, at $4.99 per month—Yes, that $4.99 per month price is pretty low compared to its counterparts, undercutting Hulu ($5.99 per month), Netflix ($11 per month) and Disney Plus ($6.99 per month); the latter service launches Nov. 12 while Apple TV+ is set to launch on November 1 in 100 countries. Then there is the gaming service, Arcade also for $4.99 which launces with some power games and really cool features.
Well you see where I’m going with this and something is definitely going on at Apple to everyone’s surprise. It’s not that surprising though when you were the number one smartphone maker a decade ago and now you’re now number 4 in the world (well blame the tariffs/trade war all you want but Huawei has been the worst hit but have managed to stay at number 2 only behind Samsung) but still maintains some of the most expensive gadgets.
Well Apple is now doing something that looks drastic about that and could now be realising that sometimes you need to sacrifice profit margins for a bigger market share which is has been losing constantly.
Speaking to Telecoms.Com, Ed Baron of analyst firm Ovum said
“The price point and a free year of access for new Apple device buyers are aggressive moves which will help drive early growth and usage,” said Barton. “But it’s still, by volume of content, a very limited video service with no catalogue content wholly reliant on new, untested intellectual properties.
“The strength of the Apple hardware and services ecosystem means that it practically can’t fail and a lot depends on how effectively and frequently Apple drops new shows to maintain viewers’ interest levels. Apple’s $6 billion production investment and its ability to surface and promote Apple Video content to a global audience of hundreds of millions throughout its tightly integrated hardware and software ecosystem give the service huge potential.”
Apple has benefited from its popularity and rich ecosystem over the years and has sat on top of healthy profits for over a decade but innovation in smartphones have also begun to slow and this has seen less and less users jumping on new phone announcements and pricing has not helped matters either. Manufacturing costs have remained relatively low, consider that a 64GB 4.7 inch iPhone 8 costs about $247.51 (launch price was $699) to make and this is up about $11 for a 32GB iPhone 7. In fact without adding manufacturing costs, it actually costs Apple $288.08 to make the iPhone 8. According to BuisnessToday Apple shipped 87 millions of its newest-generation iPhones (iPhone XS, XS Max and XR) between Q4 2018 to Q2 2019, which was 26 per cent lower than the previous generation (iPhone 8, 8 Plus and X) achieved in the same period a year earlier.
Well now you get the gist, it just makes sense for Apple to cut prices to focus on the market share and volumes. By making its gadgets and services more affordable, Apple leveraging on its strong ecosystem stands a chance to probably gradually start leading again.