Wednesday, September 12, 2018

Apple Announcement Day - Fall 2018

I won't bore you with predictions.  There are way too many sites that have a better line on the details and leaks coming from our little Cupertino based company.  I won't speculate on the offerings.

What I will do is editorialize on the death of the sub-$1000 smartphone.  While the iPhone has only been around for about 10 years, the cost of that device has gone up exponentially.  Long gone are the days of subsidized phone plans that made a foray into the smart world economically better than today's market.

You are left with two options - maybe a third:

  1. purchase the phone outright - I did this last year - cost $1200 dollars for the 256 GB iPhone X not including the tax and time spent waiting in line to get it
  2. purchase through an installment plan through cellular provider - not a bad offering, but all it does is spread the same payments out over 12 or 24 months - you will still pay the full retail cost of the phone, just in bite-sized chunks every month
  3. buy a used, older model phone (for a tech guy like me - not an option)
This year will not be any different.  I swore that last year, that the iPhone X would be one of my last smartphones from Apple - given the exorbitant pricing.  The iPhone X costs Apple about $400 to make, but sells for a minimum of $1000.  That is a $600 margin.

Here is a breakdown of the model, costs to manufacture (at the time) and retail cost (at the time) of every iPhone base model:

iPhone Jun-2007 $220 $499
iPhone 3G Jul-2008 $174 $199
iPhone 3GS Jun-2009 $179 $199
iPhone 4 Jun-2010 $187 $199
iPhone 4S Oct-2011 $188 $199
iPhone 5 Sep-2012 $194 $199
iPhone 5C Sep-2013 $173 $99
iPhone 5S Sep-2013 $198 $199
iPhone 6 Sep-2014 $211 $199
iPhone 6+ Sep-2014 ? $299
iPhone 6S Sep-2015 $211 $649
iPhone 6S+ Sep-2015 $236 $749
iPhone SE Mar-2016 $160 $399
iPhone 7 Sep-2016 $224 $649
iPhone 7+ Sep-2016 $277 $769
iPhone 8 Sep-2017 $247 $699
iPhone 8+ Sep-2017 $295 $799
iPhone X Sep-2017 $370 $999
iPhone Xs Sep-2018 ? $999
iPhone Xs Max Sep-2018 $370 $1099
iPhone Xr Sep-2018 $? $749
Take-aways from the above table (data grabbed from IHS over the years) is that Phone subsidies stopped around the iPhone 6/6S time frame.  This started in 2013 and moved through the carriers and by the time the iPhone 7 came around, the entire subsidized market had ended.

Also - The Xs, Xs MAX and Xr were announced today - I put their numbers there... but damn.   The era of sub $1000 smartphones is truly at an end.  There are a few great smaller companies out there making headway and doing some cool things for under $1000 - OnePlus is a great android option, but if you are in the Apple Universe and love that eco-system, you will continue to pony up.

The Apple Watch is a great example of that.

I had the 1 series - passed off to my 13 year old, now.  I have the 3 series with Cellular - paid $429 for that watch last year (Sept 2017).  Series 4 was announced today and the non-Cellular version starts out at $429 - with cellular now ponying up an extra Benjamin for the privilege of using the watch without my phone, which was a valued proposition at $429... but now it is $529!

Needless to say, to refresh my line-up for 2018... will set me back around $1800 or so.  WOW!

What point do I look at the value add and see what makes the best sense.  I think I will update the watch - because the EKG is worth the extra money.  But... the phone... I think I will wait to see the reviews on the camera and the other functions to see if the "S" is valued enough.

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