Apple’s iPhone 14 event was notable more for what the company didn’t do: Raise prices on its top-end smartphones
Chief Executive Tim Cook didn’t show off “one more thing” on Wednesday, but he did have one new Apple Inc. offering to share: reasonable pricing.
Apple has long shown a willingness to charge premium prices for its iPhones, including breaking the $1,000 barrier a few years back with the iPhone X, and was expected to increase prices on the smartphones again with the iPhone 14 unveiling on Wednesday. Cook kept the price the same as the last two iPhone models, however, and even added in some other deals: Free satellite emergency service for two years, and an update to Apple Care+ to remove a limit on the number of repairs each year.
“It was a shock, I thought a $100 price increase was a foregone conclusion,” said Dan Ives, an analyst at Wedbush Securities. “Apple read the room and Cook didn’t want to raise prices.”
At the very least, analysts expected Apple to increase prices on its top-end smartphones, the iPhone Pro and Pro Max. Maribel Lopez, principal analyst at Lopez Research, said she had been hearing talk of price hikes of up to several hundred dollars that would “fork the line,” or allow greater separation between lower-priced and premium offerings.
“This was their opportunity, they were going to fork the line, and have very affordable and very flagship, and that was surprising that didn’t happen,” Lopez said. “I think that is the right move. It’s becoming difficult to get people to upgrade, they hold onto them longer, they are not inexpensive.”
The concern for investors from this move would be Apple’s profit margin. Record inflation has not just hit consumers — electronics manufacturers are seeing higher prices and uncertain supply of many components. The 15-year-old iPhone family is still Apple’s biggest revenue and profit generator, even as it is a mature product, so a margin decline would be felt acutely on the overall bottom line.
Lopez and Ives said the move should not be too much of a drag on Apple’s margins, however, thanks to strength with suppliers and a move toward using Apple’s own semiconductors.
“They have more control over their supply chain,” Ives said, adding that “the Apple silicon gives them flexibility.”
“Everything being an A or an M chip, that allows them a certain flexibility,” Lopez said. “It’s a classic vertical integration strategy.”
Apple unveiled some new offerings that were not price-related, mostly features targeted at increasingly specific audiences, such as the Apple Ultra Watch for serious fitness enthusiasts. But Cook again didn’t take the opportunity to use co-founder Steve Jobs’ product-launch catchphrase, “one more thing,” at the end of an unveiling to show off the next big product — even though Apple may have a big launch on the way.
Apple reportedly is working on three sets of augmented/virtual-reality glasses, with one expected to launch next year and compete with Meta Platforms Inc.’s Oculus offerings. It would be only the second major product category to launch under Cook’s leadership, beside the Apple Watch.
But Apple never shows off the next big thing without a fully formed product ready to roll. So instead, Cook is just trying to keep consumers happy with new iPhones — at flat prices with better cameras, longer battery life and new features — until its next foray is actually ready.
That doesn’t do much for investors, though. They are still wondering when they will get a glimpse at the next device they are betting on, and will have to worry about the possibility of declining margins while they wait.
Also Read: Apple Launching iPhone 14 and Other Products, a 'Major Feat' Says Analyst Sources: StreetInsider
Apple (NASDAQ:AAPL) held its first in-person product launch event since before the pandemic Wednesday afternoon with the highly anticipated iPhone 14 launch.
While the iPhone 14 was front and center at the launch event, Apple also announced a raft of other products and updates, including the Apple Watch Series 8 and the enhanced AirPods Pro 2.
The iPhone 14 series includes the general model, the 14 Plus, the 14 Pro, and the 14 Pro Max.Apple said the 14 and 14 Plus models include the A15 Bionic chip with a 5-core GPU, while the 14 Pro and Pro Max are powered by A16 Bionic, the fastest chip ever in a smartphone.
Furthermore, Apple announced new satellite-enabled services for some of its products, with Globalstar, a satellite communications firm, managing the satellite-powered emergency SOS service.
Apple will pay 95% of the approved capital spending Globalstar makes in connection with the new satellites, according to a filing.It also states that they are expected to make the services available to customers during the fourth quarter of 2022.
Globalstar shares surged following the news earlier today but closed the session down 1.4%.
Reacting to the Apple announcements and event, Wedbush analyst Daniel Ives, who has an Outperform rating and a $220 price target on the stock, said, "the Apple Watch and AirPods have transformed from a rounding error to a significant tangential product segment at Apple."
He added that it speaks to the monetization of a golden 1.8 billion iOS installed base that remains "unmatched globally."
"Taking a step back, launching 3 new core hardware products within the Apple ecosystem despite the biggest supply chain crisis seen in modern history is a major feat for Cook & Co., especially with the zero Covid shutdowns in China seen in April/May," he added.
Commenting specifically on the iPhone 14 launch, Ives stated they believe the "initial order for 90 million iPhone 14 units out of the gates with Asian suppliers has stayed firm" based on recent checks and will be roughly flat with iPhone 13 despite the macro storm clouds building."
Apple shares gained just under 1% in Wednesday's session.
