iPhone XR: Affordability from the ground up

Until now, says Mark Hibben, Apple’s approach to making iPhones affordable was to sell you last year’s phone.

From Where No iPhone Has Gone Before, posted Wednesday on Seeking Alpha:

Following Apple’s launch event, the takeaway of most of the tech media was that Apple had simply gone for higher priced iPhones and was trading ASP for unit sales. This could be a misinterpretation. I think the value proposition of XR is quite compelling, since it offers most of the features of the XS at a $250 discount.

Apple did something new with the iPhone XR, and this completely escaped the attention of the tech media covering the September launch event. iPhone XR represents the first iPhone engineered from the ground up to offer better value while retaining key features of its more expensive siblings. Apple has never done that before. Even the iPhone 5c and SE were just rehashes of the iPhone 5. Making affordable iPhones was something of an afterthought.

Up until now, Apple’s approach to offering more affordable iPhones was based on selling previous generation iPhones, or previous generations with minor changes. Each new iPhone represented the “best” that Apple could achieve in a particular year.

My take: Hibben, who writes a newsletter called Rethink Technology, is one of Seeking Alpha’s best.

10 Comments

  1. Kathy Corby said:
    I tend to agree that the XR is likely to be a “sleeper cell” -phone. (See what I did there 🙂 ?)
    I suspect the volume of units sold will surprise even the analysts, and apparently the demand has already surprised Apple, who are rumored to have increased build numbers. It willl not escape the buying public that they are getting the XS/XSmax specs in an affordable and attractive package– perfect upgrade for the ordinary iPhone buyer. In the meantime the XSmax is the perfect phone for the Apple fanbois and gurls amount us, as well as affluent Asian buyers who tend to prefer larger form factors. So the XR pulls up the number of total phones purchased, and the XSmax holds up the ASP. What’s not to like?

    5
    September 26, 2018
  2. John Kirk said:
    “Apple did something new with the iPhone XR…iPhone XR represents the first iPhone engineered from the ground up to offer better value while retaining key features of its more expensive siblings.”

    I’m not sure this is quite accurate. Let’s look at 2017 pricing:

    $549 iPhone 7

    $699 iPhone 8

    $999 iPhone X

    So the older iPhone 7 dropped in price to $549.

    But the brand new iPhone 8 had a price of $699

    And this year’s iPhone XR comes in $50 HIGHER than the iPhone 8 at $750.

    Now, maybe I’m missing something, but is it accurate to say that iPhone XR represents the first iPhone engineered from the ground up to offer better value while retaining key features of its more expensive siblings? Maybe. But maybe not.

    I’m willing to be convinced. What say you?

    3
    September 26, 2018
    • Fred Stein said:
      I’m aligned with you John on this point.

      The SE was engineered to a price point, putting the 6S internals (A9 chip) into the C form factor and hitting a lower price. Also, Hibben is right that the XR price and feature set is brilliant. They dropped the telephoto which costs little and the OLED which is a cost driver, but kept the A12 and the new look.

      Keeping the A12 is genius, as way to migrate the installed base to the most powerful chips for iOS releases 3 to 6 years from now. Apple has this mapped out far into the future.

      The XR needs a low price to compete with used telephoto-capable iPhone X models.

      2
      September 26, 2018
  3. Gregg Thurman said:
    John, you beat me to the punch (sorta : ) ).

    The base iPhone 7 was $649 when launched. The base iPhone Xr is $749.

    I believe the iPhone Xr is a replacement for the next in naming convention “iPhone 9”, which would most likely have a base price the same as last year’s iPhone 8 ($699), ergo, the iPhone Xr is priced $50 higher than last year’s iPhone 8.

    Over a two year period, Apple has raised the base price of the iPhone by $100. The iPhone Xr, while a much greater value than the iPhone 7, it is not less expensive.

    For those that believe this year’s iPhone ASP is going to be lower than last year’s ASP, let me point out these facts.

    Totaling the list price of each of FY2018’s 16 iPhone models equals $10,974 (ASP $686).

    Totaling the list price of each of FY2019’s 17 iPhone models equals $14,823 (ASP $872), with the lowest priced model being $100 higher than FY2018’s lowest priced model.

    Four of FY2019’s 17 iPhone models priced higher than FY20128’s highest model.

    Actual full-year FY2018 iPhone ASP will be ~$756 (10% above the average of the 16 available iPhone models).

    At $900 my projected FY2019 iPhone ASP is 3% above the average of the 17 available iPhone models. Although I expect FQ1/2019 iPhone ASP to be higher than $900 I am using that value for each of the year’s 4 quarters until Apple reports differently.

    3
    September 26, 2018
  4. Jonathan Mackenzie said:
    These comments are exactly why I keep coming here every day. You are not all saying the same thing, and yet you all have something smart to say. The heavy lifting is done by PED, of course, but Apple 3.0’s comment section is almost always rewarding.

    Stars for everyone.

    4
    September 26, 2018

Leave a Reply