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Apple struggles to justify grand price point for the iPhone X

iPhone X

Apple has finally unveiled the extensively leaked iPhone X ultra-premium smartphone but the $1,000 price point risks alienating many loyalists.

Among the iPhone X headline features are a 5.8-inch ‘super retina’ display, which covers almost the entire front face of the device and which Apple somewhat snottily describes as ‘the first OLED panel that rises to the standards of iPhone.’ There’s a new SoC – the six-core A11 Bionic chip that Apple claims is 70% faster than the previous one and there’s ‘3D facial recognition’ which is supposed to be better than the current alternatives.

“For more than a decade, our intention has been to create an iPhone that is all display,” said Jony Ive, Apple’s chief design officer. “The iPhone X is the realisation of that vision. With the introduction of iPhone ten years ago, we revolutionised the mobile phone with Multi-Touch. iPhone X marks a new era for iPhone — one in which the device disappears into the experience.”

“iPhone X is the future of the smartphone,” said Philip Schiller, Apple’s head of marketing. “It is packed with incredible new technologies, like the innovative TrueDepth camera system, beautiful Super Retina display and super-fast A11 Bionic Chip with neural engine. iPhone X enables fluid new user experiences — from unlocking your iPhone with Face ID, to playing immersive AR games, to sharing Animoji in Messages — it is the beginning of the next ten years for iPhone.”

iphonex_animoji_poo

As you’ve probably worked out for yourself the iPhone X naming is derived from the roman numeral for ten – signifying the tin anniversary of the exalted gadget. Apple clearly felt the need to make some kind of symbolic gesture and accordingly reserved most of its headline new features for the X, to the detriment of the iPhone 8 and 8 plus, which were launched at the same time.

But at what cost? The X starts at $/£1,000 while the 4.7-inch 8, which doesn’t have the new super-duper display and facial recognition but does have the A11 chip, starts at $/£700 so Apple is charging a lot for that screen which, incidentally, is probably supplied by Samsung.

This creates a real dilemma for iPhone users. Talking to a few of them after the launch the general feeling was not only that £1,000 is too much but that the very existence of the X significantly reduces the appeal of the 8 or 8 plus as they now seem like second-rate phones in comparison. The fact that the X isn’t even available until the end of October might make buying an 8 before then feel like even more of an anti-climax.

Time will tell whether this is representative of broader market sentiment but Apple’s triumphalism has the potential to backfire significantly as loyalists opt to hang onto their existing phones for at least another year rather than either break the bank or upgrade to an iPhone 8 that doesn’t even feature many of the latest gizmos. Then again the X could be a massive success causing Apple’s $250 billion cash pile to grow faster than ever.

Geoff Blaber of CCS Insight reckons the X is more indicative of a long-game from Apple. “The iPhone X is a long-term investment by Apple that sets a template for the next generation of iPhone hardware,” he said. “We expect OLED displays and the new design to become standard iPhone features for years to come. A staggered introduction of OLED technology and the new design enables Apple to steadily ramp up scale in its supply chain and maximise profits.

“At $999, the iPhone X is priced to be a natural increment beyond the iPhone 8 Plus. The higher price of the 256GB variant adds a new ‘super-premium’ product tier beyond the existing 256GB iPhone 7 Plus, which costs $969. It creates an aspirational ‘halo’ product at the top of Apple’s growing iPhone portfolio.”

The other significant announcement from Apple was the Apple Watch 3 which, as rumoured, is the first to feature an LTE modem. Among the additional cleverness is the inclusion of an eSIM that uses the same number as the owner’s iPhone, which will presumably be quite popular with potential Apple Watch buyers.

But this doesn’t address the issue that has blighted the smartwatch category from the start: its limited utility. Until a genuinely useful new UI paradigm is created smartwatches will remain glorified fitness bands and the inevitable Apple price premium – the AW3 starts at £400 – makes a purchase even harder to justify.

“Well I don’t know about you but I just think it’s too much to have to pick your phone up from your pocket when someone calls,” said one iPhone owner when asked if they were tempted to buy an Apple Watch. “I mean, who’s got time for that in their busy modern lives? In fact, I’m going to get two and wear them both on either wrist, in case someone calls and I’m scratching my arse with my left hand at the time.”

The final announcement was a version of Apple TV that supports 4K video, which was generally viewed as a catch-up move rather than anything new. There was disappointment that Apple doesn’t seem to have gained any ground when it comes to licensing content, let alone creating its own, and TV looks set to remain a ‘hobby’ for Apple for another year. There was also a preview of an Apple wireless charging mat set to launch next year that will charge the latest devices and is unlikely to be cheap.

Apple tends to experience a spike in sales when it moves to a new form factor as opposed to just a spec upgrade. This is one of those times, so on historical precedent alone this should be a successful launch for Apple. But the $/£1,000 price point is a significant PR negative for Apple right now and the creation of a new category could diminish the others further down the stack. If Apple creates mass-market tolerance for four-figure pricing then this launch will be viewed as a success, but that’s a big if.

iPhone X and Apple Watch 3 charging


11 comments

  1. Janne Ohtonen 13/09/2017 @ 1:43 pm

    Great article, Scott. I like the big turd as it greatly symbolises the price Apple put on the new X.

    I already struggled to justify their pricing with iPhone 7 as I got Pixel 300£ cheaper. So I went for the Pixel. And now I am much happier with Pixel that I was with my previous iPhone 6! I was waiting for 8 and X to come in to see if I will go back to Apple. But no, I won’t. I don’t believe the iPhone 8 will be so much better than Pixel that I would waste my money on it. And as you said, the 8 looks like second-grade choice next to X anyway. And I don’t like that.

    I get the screen on iPhone X is great, but wait for one more year and every flagship phone will have it or better and the price will be much more sensible than Apple’s.

    Can’t wait to see what Pixel2 is going to be like and if it makes more sense! But until then, I’m more than satisfied with my Pixel.

    • Scott Bicheno Scott Bicheno 13/09/2017 @ 2:29 pm

      Thanks. The big turd is one of Apple’s own animojis :)

      Great to see both perspectives represented so eloquently in the comments.

  2. N McQ 13/09/2017 @ 1:56 pm

    Interesting write-up with a highly cyncical comment on why you’d need an apple watch on each wrist.

    Worth commenting/highlighting: there is absolutely no way Apple could put an OLED screen in every single model right now, no-one has the manufacturing scale to supply 60 million OLED screens for the first quarter. No-one.
    Additionally, it’s not ‘just’ OLED – they’re hit some color reproduction targets that aren’t in other devices. The biggest concern with Apple is the price differential may not be enough to scare some people off this halo device and purchase the 8/8-plus if they struggle to manufacture it in low quantities: they can get away with major delays on their Airpods but this may be problematic for their phones…..

    On the price, you’re now purchasing a device that provides the same performance as a 2017 Macbook Pro – you’re not buying a phone anymore, it truly is a computer. With the standard of Apple’s processors and chips, they are only stretching the gap to Android hardware. It may not be particularly noticeable when doing the basics such as browsing the web or reading social media, but if/ (when?) additional tricks take off such as Augmented Reality, they’re engineering designs will leave them miles ahead – as also demoed by fitting full 3G/4G mobile connectivity into their watch without increasing the size.

    On the Apple TV, it’s worth highlighting the same cost of purchases of 4K and HD, as well as the free update of all purchased content to 4K – that is unheard of, with some of the main 4K rental providers charging $30 for a 4K rental over a standard HD rental.

    • Scott Bicheno Scott Bicheno 13/09/2017 @ 2:28 pm

      Interesting partisan rebuttal, thanks. I’d say comical rather than cynical.

      • N McQ 14/09/2017 @ 1:48 pm

        Yes, ‘comical’ may be a better term!

        On the pricing, it’s worth keeping in mind the pricing of the ‘cutting edge’ from competitors, the best example being the Samsung Note 8 – which retails at $929 for the base model. You may be getting a slightly larger screen (albeit not as good going by the initial commentary coming from the neutral reporters in attendance at the event earlier this week), but it’s a long way behind in internals.

        As before, I suspect if the pricing for X may be too low (!) if the delays in release also reflect the likely challenges in manufacturing that level of complexity at scale.

        • Scott Bicheno Scott Bicheno 15/09/2017 @ 9:58 am

          I don’t put the device on as much of a pedestal as you do but I don’t doubt it’s an excellent piece of kit. The key thing is the symbolic move to four figures on price and how the market will respond to it. Reviewers generally derided the Note 8 as too expensive so if they don’t say the same about the X then they’ll need to explain why. I suspect people will find the money, which is why Apple is the most profitable company in the world. Personally I’m happy to pay half as much for something 90% as good.

          • Neal McQuaid 18/09/2017 @ 2:05 pm

            Good point on the Note 8 – something to consider myself.

            On the pricing, it’s very interesting how different attitudes reflect on this topic – for me, your analogy (“half as much for something 90% as good”) reflects my own attitude to vehicles: I’ll happily drive a older/basic vehicle that does 90% of a new BMW/Audi for half the price! My smartphone obviously gets more priority than my vehicle :)
            Great to engage/discuss with you and look forward to more writings, happy Monday.

  3. AndrewR 13/09/2017 @ 4:16 pm

    Surely I can’t be the only person who thinks the X is, well, a but ugly? Apple go on about the screen being ‘across the entire phone’ but it just isn’t – it looks like a mid-level phone from 2015 to me. The bezel design looks awkward with that black strip around it. Compared to, say, a Galaxy S8, it looks weak and style-less. I’m surprised Ive signed off on it – it feels like the component guys said ‘this is the best we can do today, Jonny’, and they had to go with it. I bet Samsung is giggling behind its hands at sticking Apple with such a weak component.

    • Jon 14/09/2017 @ 12:01 pm

      Compared to the Galaxy S8? Really!!? Maybe I need to get new glasses. That Galaxy S8 might look pretty snazzy on the front but it looks like Samsung ran out of budget when it came to the back. Atleast the iPhone is a bit more uniformed. Shame, about the price though. I could buy an iMac for that.

      • N McQ 14/09/2017 @ 1:49 pm

        Going by the first performance tests on the iPhone, you are buying an iMac – the performance tests show it (all the new models) outperforming a 2017 13-inch Macbook Pro. Granted some of the apps may not be pro-level just yet but the potential is now there.

  4. Doodums 14/09/2017 @ 9:33 am

    What a stinker!

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