iPhone 11’s Price Is Too Low and Will Present Challenges for Apple Later on, Claims New Report
Apple managed to display a decent amount of growth when it released its Q4 2019 earnings, thanks to increased revenue from services, wearables and accessories, and iPads. Unfortunately, iPhone’s growth continued to decelerate, though at a slower pace, with Tim Cook displaying optimism by saying that the sales of the new models are off to a great start. This can be attributed to the iPhone 11 starting price, as it costs just $699, which is a reduction of $50 over the introductory price of the iPhone XR, which now costs $599 for the base model.
Apart From the iPhone 11’s Starting Price, the Primary Dual-Camera Solution & Improved Performance Would Continue Attracting Customers
Other than reducing the iPhone 11 starting price by $50 compared to last year, Apple also didn’t increase the price of the more premium models, the iPhone 11 Pro and iPhone 11 Pro Max. These lower prices can help the company regain some lost market share and attract more consumers to use its services. On the flip side, the reduction in price is dragging down the average selling price (ASP) of iPhones, according to the latest report.
This means that Apple has realized that it has somewhat lost the strong pricing power it once had. The ASP is expected to further decline 10 percent year-over-year in the next quarter, which will translate into an overall decline of 12 percent in 2019. In 2020, the ASP is expected to slip further by 6.5 percent. In the grand scheme of things, a lower ASP might be alright as long as it helps the iPhone business get back on track. However, the demand for cheaper phones and the U.S.-China trade tensions can squeeze Apple’s profit margins.
According to the report from CNBC, the lower pricing trend from Apple may hurt the sales of the upcoming 5G-ready iPhone 12 family, as it is expected to have $150 higher average selling price thanks to a newer rumored design, upgraded cameras, and the presence of a Snapdragon X55 5G modem. However, it is also believed that consumers might not mind paying more for the next generation of wireless connectivity and demand might actually increase next year.
For now, the iPhone 11’s starting price is proving to be just the catalyst the Cupertino giant needed to boost demand while it prepares a 5G-ready phone for next year. If momentum begins to slow down, Apple has another trick under its sleeve; the rumored the iPhone SE 2 which can provide another short term boost in sales.