iPhones now cost nearly 5X more than non-Apple phones

Apple may have stretched iPhone price elasticity about as far as it can go, says Bernstein’s Toni Sacconaghi.

From a note to clients that landed on my desktop Monday:

Apple has raised iPhone ASPs over the past 4 years at a time when non-Apple smartphone ASPs saw significant contraction. In 2018, Apple reported iPhone ASPs of $766 – 27% higher than the $603 it reported in 2014. Meanwhile, non-Apple smartphone ASPs declined ~15%.

The upshot is that the average iPhones now cost nearly 5x a non-Apple smartphone – an unprecedented premium even for Apple (Exhibit 5). At some point, we worry that demand elasticity will drive down demand or push out replacement cycles, and/or Apple will no longer be able to raise prices to offset flat or declining unit volumes.

Cue Exhibit A:

iPhone price elasticity

My take: Sacconaghi is a glass-half-empty kind of guy these days, This nugget comes from a longer note in which he worries about several aspects of Apple business, including the risks of making phones that last too long. Paging Horace Dediu.

6 Comments

  1. Gregg Thurman said:

    Apple need not “raise” iPhone prices to achieve higher ASPs.

    iPhone ASPs will rise simply due to higher priced iPhone X/XS, and later models, replacing iPhone 8 and older models, in the iPhone model mix.

    Averaging the price of all iPhone models offered (one of each) each year shows ASP’s increasing to:
    $872 during FY2019
    $958 during FY2020 and,
    $1065 during FY2021 where ASPs stabilize, having flushed out all iPhone 8 models.

    These ASPs do not take into consideration model mix, giving the same weight to the least expensive iPhone as it does the most expensive iPhones.

    1
    November 12, 2018
  2. Fred Stein said:

    The headline should be “OMG, Android ASP drops 33% from $246 to $162”. That the real story.

    Back to my old ‘used iPhones’ rant….

    1) With 134M used iPhones sold last FY, Apple can’t sell sell lower priced iPhones. The market is flooded with great used iPhones .A refurbed iPhone 7 goes for $284.
    2) We can’t calculate with any accuracy, but 134M is about 1/2 of the new iPhones sold. Adding that into the mix would drop the ASP of new-plus-used iPhones sold.
    3) All the new X series iPhones, and used high-end iPhones, impact sales of Android high-end phones, lowering their ASP.

    It’s all simple arithmetic if you tease it out.

    2
    November 12, 2018
    • Alan Birnbaum said:

      Why doesn’t Toni compare:

      Nissan Versa/ Chevy spark (base about $13k)

      Lexus ES (base about $39K)

      This reminds of an old Abbott & Costello routine ! ( I’m 40 & my girlfriend is 10 …)

      2
      November 12, 2018
  3. Gregg Thurman said:

    I think Sacconaghi’s comments illustrate just how shallow/manipulative WS is.

    They zero in on a preconceived notion then search for the data that supports their thesis, while ignoring all evidence that refutes it.

    0
    November 13, 2018
  4. Jonny Tilney said:

    I am going to bet that the price gap between Apple products and the rest is going to grow in the future, former going up, the latter going down. And not just iPhones…

    The rest will increasingly compete on a) price, and b) ability to mimic Apple.

    0
    November 13, 2018

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