Nabila Popal, IDC’s Senior Director, Data & Analytics, has provided the following insights to Apple World Today about the rising costs of Apple’s products.
Topline Insights:
- Since the memory crisis has been in play for many months, we already expected Apple to increase iPhone prices. Thus, the news is no surprise to us, as we already baked it in our forecast of Apple iPhone ASPs on average increasing by 11% this year, with the hit coming starting in the fall. This was also a different move from Apple to publicly share their intention ahead of the actual price increases, which suggests to me they wanted to cushion the consumers from the shock at the fall launch. If consumers are psychologically prepared for higher prices, it won’t impact sales. Plus, an earlier announcement means the story at the fall launch is no longer the price hike, but the added value of the new devices. Thus, I don’t think an early announcement necessarily means price hikes are coming now.
- In our forecast, we had assumed a price hike of $100 to pro and ProMax models, and $50 hike to base models– however, seeing the price hikes today to iPad and MACs going as high as $300 for some models, my personal instinct says the hike to iPhones may be even higher than what we assumed – perhaps even $200 to the pro/Promax models. I think the days of $50 price increases are over.
- The foldable iPhone has been rumored for a $2,000 price point. We expect the foldable iPhone to have an average selling price of $2500, with higher storage options to go as high as $3000. The high price of this premium niche product will help offset some of the increased memory costs, and help avoid a larger price hike to other models while still protecting Apple’s legendary price hikes.
- Given the memory crisis has been in the books for a while, and this is already a niche luxury product, we already assumed Apple would incorporate higher prices in the foldable device to offset higher increases in some of the existing models.
How price hikes on iPhones will impact Apple’s upgrades this year and beyond:
- Apple Intelligence and Siri AI will be available only on iPhone 15 Pro models and onwards, which represents about 466M devices.
- This means a good chunk of Apple’s iPhone installed base has a compelling reason to upgrade. To put it in perspective, 54% of iPhones shipped since 2022 will not have the new Siri, and their users will itch for an upgrade.
- Anyone sitting with an iPhone 15 and below has a strong upgrade this year, despite the expected price increase. Even if they can’t afford the 18 series, they can upgrade to an n-1 or n-2, aka an iPhone 16 or 17 that can run the majority of Apple Intelligence – either way you look at it it’s still an upgrade and more revenue for Apple.
- In short, anyone with an iPhone 15 or older that didn’t upgrade to the 17 last year is likely to upgrade this year.
- All these point to another massive upgrade cycle for Apple this year and in 2027.
- Also, most proMax consumers are premium-focused and less price sensitive, so they won’t be dissuaded by a $100-$200 price increase. Plus, if you think about it, most premium iPhones globally are bought on installment plans; a $200 price increase over 36 months amounts to $5 more a month. Would that make someone like me not buy the latest phone? I don’t think so. Especially if I am sitting on the 15 or 14 that doesn’t have Siri AI, I am buying the new one.
Data Points:
- Per our latest forecast, where we already assumed Apple would raise prices this year, Apple is forecast to ship close to 240M iPhones. This represents a 5% decline YoY; however, it is mostly due to the move of the 18 base model to next year, not the price hike or memory shortage.
- In fact, despite the expected price hike, we improved the forecast from 8.1% drop.
- Given extremely positive early feedback of Siri AI, I believe there is a further upside to our Apple forecast, with potential to even reach close to 245M.
- Apple is forecast to have a record high 22% share this year, 2 pts higher than their existing record in 2023 of 20.2% share.
- Despite the expected price hike, Apple’s forecast in China was improved as well, from -9.1% to -3.5%, as Android suffers a 37% YoY drop due to the memory constraints!
- Despite the annual decline, Apple will see a record high share of 18% this year in China.
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