Apple Tax and increasing costs question - a theory on its limits

[Combat squirrel]

As title, I just got thinking about how much apple is costing these days, their prices are soaring globally yet they still sell out, this got me thinking (perhaps a pole can be made?) - at what point would the prices have to go up to stop ~90% of sales of Iphone X?

For example, lets say Iphone X cost:

£999
£1499
£1999
£2499
£2999
£3499

I have a feeling many would still buy it, even at twice the cost, in all seriousness.

I'll use the Iphone X as the main example, but were already looking at those prices for the macbook pro line, so at what price would you stop buying for the baseline macbook pro ?

£1499
£1999
£2499
£2999
£3499
?

Is there a limit ? As time goes on and austerity grows and the line between the rich and poor ever increases, the middle class seem more obsessed with the latest and greatest to try and slot into the 'rich' line....but the recent apple increases really have for the first time in ~12 years in my memory made the apple products once again a super luxury - maybe that's why the prices jumped, apple didn't want themselves to become to 'common' in their pricing?

I realise its a complex issue and i'm thinking of it from a more sociology perspective - and of course the devices are more complex now, but, even within Iphone 3G at the time it was still cutting edge - yet 3 times cheaper.

Thoughts - id also love people to name 2 prices - the price at which they would not buy an Iphone X and the price you think it would take around 90% of people to say no.

For me:

Id not buy = £1499
90% no = £2499

 

[b0rn2sk8]

I'd not buy = £800
90% no = £1500

Apple actually increased the price of the iPad pro by $50 with this release. First time I have ever seen that in a mid-cycle of one of their products.

 

[Hater]

How many "sport" Apple Watches do they sell between the "Watch" and "Hermes" models?

Somewhere between those figures.

I bought my iPhone 6 for $867 in 2015, since then i've said no to every model since that was over that sum of money, so there's that answered. $900. 500 quid.

 

[x-st]

Isn't it complicated by the actual costs being masked by the contract system. People might be happy paying £80 a month for an X, whilst they wouldn't in a lump sum. By obscuring the true cost a little people can feel a little better about justifying the need for a new phone.

 

[Combat squirrel]

Interesting answers and people not willing to go over 800 is interesting!! So id assume at 799 its a possible buy ? :O

 

[labbby]

I will try and find the youtube video i watched a few days ago that actually shows the hardware profit apple makes on a sale of an iphone... It is pretty scary.. The way it has been worked out though is based on hardware only and doesn't include such things as PR and so on. Although i would expect apple store sales of accessories and app store makes a hell of a lot as well.

Would be interesting to get a rough idea of what samsung high end phones make in profit as well.

 

[Daaaavvveee]

I will try and find the youtube video i watched a few days ago that actually shows the hardware profit apple makes on a sale of an iphone... It is pretty scary.. The way it has been worked out though is based on hardware only and doesn't include such things as PR and so on. Although i would expect apple store sales of accessories and app store makes a hell of a lot as well.

Would be interesting to get a rough idea of what samsung high end phones make in profit as well.

I would assume they make quite a lot on all their technology. But its the years of R&D that goes into it, peoples wages etc and the face they are a business, so need to make money to keep shareholders happy.

 

[labbby]

I would assume they make quite a lot on all their technology. But its the years of R&D that goes into it, peoples wages etc and the face they are a business, so need to make money to keep shareholders happy.

Yeah i agree that's why i said what was shown on the video (that i am still trying to find) was only hardware based.. I do recall they showed market growth to profit and apple was pretty low on it. The ones that are making the real growth in the market are the smaller companies on the android side... samsung was also miles behind on this as well.

With years and billions going into R&D i would (personally) have expected much bigger break throughs in tech.. Like you say to keep the share holders happy they need to show profit which means charge more and make more profit on a single item if the actual product volume being shifted is dropping.. problem is, if the market is slowing down (which it appears to be) it only effects us at the end of the day. What amazes me is the amount of tech on the apple phone that is made by other companies... I find the whole iphone x screen that they could only get from samsung very interesting.

im no anti apple or any phone company type person ( i actually ordered the iphone 8+ although im going from a 6) I just actually find it interesting..

The watch3 is another interesting aspect of this... is this the next step in mobile phones rather than things like the samsung note and iphone x... Maybe in 5 years time we will all be walking around talking to our wrists.

 

[Combat squirrel]

I really dislike that because phone sales are slowing, we are being punished - sod the shareholders, what did they expect to happen when everyone on the market has the product, your only going to get people upgrading - what did they expect to happen ?! lol

 

[Tatsuki]

Isn't it complicated by the actual costs being masked by the contract system. People might be happy paying £80 a month for an X, whilst they wouldn't in a lump sum. By obscuring the true cost a little people can feel a little better about justifying the need for a new phone.

I see a lot of this reasoning from people on forums, they are only it's only £10 more a month for the latest phone I can afford that no problem so the creep up in prices doesn't seem as bad for them even though it's still £240 less quid in their pocket at the end of the contract. I buy my phones outright so the increased cost really affects me.

I am on my 6+ 64gb from 3 years ago, which cost me £699, and I thought that was a insane amount of money to pay back then, to get a equivalent storage amount now I have to spend £799 or £949 (iphone 8+ 64gb or iphone X 64gb) but really I wanted to buy a 128gb model this year as my 64gb has 1gb left but Apple removed that option and the next jump is to 256gb which is £949 or £1149. So I am thinking of waiting till ioS 11 comes out and see if the new photo and video compression system saves me enough space and I may stay with my 6+ for another year, keeping the phone for 4 years will almost justify the cost (I upgraded my PC in 2012 for £670 and it's still going strong with no need to upgrade!)

I feel like, for people who buy outright, four year phone upgrade cycles will begin to make sense, especially with the increasing cost of phones. My 6+ still works pretty well, it takes a couple seconds to open apps or webpages but well within usable parameters for me.

A lot of the upgrade urge is driven by marketing and getting a little bored with what you have, which is why I think the 8 and the 8+ don't appeal that much to me even when you factor in the high cost, they look pretty much like my 6+ from 3 years ago and with a case on will look exactly like it, the X looks different but the price is so crazy that it's not even a candidate for me. And this factor has tempted me to consider Android again but at the end of the day iOS is probably enough to keep me on Apple for a little while longer.

 

[Broken Hope]

HEVC and HEIF is only for newly recorded videos and taken pictures, it won't affect stuff currently on your phone.

 

[Tunney]

.but the recent apple increases really have for the first time in ~12 years in my memory made the apple products once again a super luxury - maybe that's why the prices jumped, apple didn't want themselves to become to 'common' in their pricing?

Apple's products have been rising in price mostly because of the weakening pound post-Brexit vote. If you look at prices in the states, they've barely shifted in recent years.

The iPhone X is the obvious exception and I think it's a very interesting one. Apple has had a problem for a good few years now: unless a component can be manufactured in the hundreds of millions and work perfectly, it couldn't be used in the iPhone. Apple sells the iPhone in such quantities that it suffers from diseconomies of scale.

So how does Apple push the envelope on innovation in this scenario? The obvious answer is to sell a phone that won't sell 75 million units per quarter and the obvious way to dampen demand is to increase the price.

The higher prices is obviously good news for Apple and it also means that Apple can push the boat out on features and materials. The question will be whether Apple has got the balance between supply and demand correct. Some sources are suggesting that the iPhone X will be a sell-out well into 2018.

I don't think it's anything to do with Apple not wanting to become 'common'. They still sell a range of models starting at £349. This is about being to innovate at a satisfying pace.

 

[Phemo]

I'm left wondering if this is some kind of test for Apple to see what they can get away with.

Firstly, the naming scheme moving forward is going to get complicated - X was chosen because it's the 10th year anniversary so it makes sense, but what does that mean for the future of the two lines with regards to naming? Will we get an iPhone 9 and an X2 next year or what? It seems a bit crazy having this many devices too - as of right now, the Apple site is showing iPhone SE, iPhone 6S, iPhone 7, iPhone 8 and iPhone X - too many SKUs so it'll be interesting to see which ones do get dropped or if they'll keep them all to cover various price points.

Secondly, various rumours before it was announced mentioned manufacturing troubles/severe stock shortages so I imagine that's a large contributing factor for the price of the X. I suspect next year that it'll be a different story there and as such we'll probably see cheaper prices. It wouldn't surprise me if they move back to a regular and a plus device next year, both with beefed up specs and OLED screens.

I'm actually a little surprised to see just how many people are flat out refusing to pay £999 this time around. Normally I read of (and know of) many people who will pay pretty whatever they charge, without questioning it, but this time it seems more people are put off by the price than I thought. I still think that the X is going to sell stupid amounts though, but I also think it would still sell stupid amounts at £1499. I think it would take the £1999 point to put the majority off.

Likewise, for the MacBook Pro, I think it'd take a £1999 tag for the average spec to put most people off. I'm still a little miffed that if I want to upgrade my retina MacBook Pro that I bought in January 2014 for £1249 with an i5, 8GB RAM and 256GB SSD I'd have to spend significantly more this time around. Even if I paid £1449, I'd get... an i5, 8GB RAM and 256GB SSD. Granted, the CPU is a few generations ahead but I'd bet performance isn't much difference at all, although battery life would be noticeably better I'm sure. Just sucks that almost 4 years of 'progress' and £200 extra gets pretty much nothing more these days, although of course that's not entirely Apple's fault thanks to Intel being lazy and the pound going down the toilet etc.

 

[Combat squirrel]

Yeah interesting read Phemo, I agree with your points.

It really is an apex time in the world now with a combination of money, resources, the ever increasing austerity, and the Iphone X is the first noticeable - 'wow really that price' moment ?

In thinking about it, I guess people of this forum like me, tech fans - will be the first to notice the 'beginning of the end of endless resources' as prices will just go up, and up and up and up and up - at this scale of manufacturer the raw materials, labour, energy can't last forever, thus a luxury company like apple will just charge insane amounts, Id not be surprised in 10 years the latest and greatest tech costing more than £5000 at todays prices (each, per iphone, macbook pro etc), for a huge amount of reasons, its the only way to keep a company growing, yet keep the image apple has, they appear to be a transitionary company somewhere between 'mainstream' and 'super luxury'.

 

[b0rn2sk8]

I have bought a lot of Apple products in the past and still am, we have 5-6 apple products in use in the house but I have now had to say no more. It Brexit tax aside it is just too much money. Their competitors have upped their game significantly over the last 5 years.

I think a lot of people are going no way to the X because it:
Offers nothing in terms of features over an iPhone 8+ but is more expensive.
Offers nothing in terms of design over an S8 which is significantly less expensive to buy.

Why is it so much when it does nothing special. Face ID? Come on, just stick touch ID on the back/side and be done with it....

The iPhone 8 is more than the 7 was in $.

They just raised the price of the iPad pro by $50.

Its not just the iOS lines they are milking for every penny either.

Touch Bar Macbook Pro's added a huge $ mark up over the previous gen. Who actually uses the Touch Bar like it was imagined in the keynote? Again solving a problem that didn't exist but adding huge cost at the same time. Don't get me wrong they are a great bit of kit but the price is eye watering.

Macbook Air - this is a poor laptop for the money in both design and specs.

iMac is decent but the storage is a **** take and non user replaceable.

Mac Pro.....

Mac Mini....

 

[Amp34]

Apple's products have been rising in price mostly because of the weakening pound post-Brexit vote. If you look at prices in the states, they've barely shifted in recent years.

The iPhone X is the obvious exception and I think it's a very interesting one. Apple has had a problem for a good few years now: unless a component can be manufactured in the hundreds of millions and work perfectly, it couldn't be used in the iPhone. Apple sells the iPhone in such quantities that it suffers from diseconomies of scale.

So how does Apple push the envelope on innovation in this scenario? The obvious answer is to sell a phone that won't sell 75 million units per quarter and the obvious way to dampen demand is to increase the price.

The higher prices is obviously good news for Apple and it also means that Apple can push the boat out on features and materials. The question will be whether Apple has got the balance between supply and demand correct. Some sources are suggesting that the iPhone X will be a sell-out well into 2018.

I don't think it's anything to do with Apple not wanting to become 'common'. They still sell a range of models starting at £349. This is about being to innovate at a satisfying pace.

That's not true at all. The disproportionate increase last year in the UK was a result of Brexit. This year the price rises have in the UK are in line with price rises around the world. Prices all over Europe have taken a sharp jump and prices over here have too - it used to be very similar to the US for Apple products. In the last year (with little difference in exchange rate) the costs have shot up, to the point they are almost CAD$-£ similarity, and way more than popping over the border and picking one up in the US.

It appears that for some reason while prices in the US have stayed broadly similar, Apple have decided (for whatever reason) that prices in the rest of the world should increase significantly. Take the iPhone X and the Note 8 - in the US the price differential is $70. Doesn't seem that bad at all IMO (price differential, not considering actual prices at this stage), in the UK that price differential is £130 ($180). In France the iPhone X is 1159 euros (£1030) and the Note8 is 1050 euros, so in between the US and UK disparity.

The iPhone X is a bit of an outlier as you say, but the same trend is visible in most of the other products.

 

[Somnambulist]

Firstly, the naming scheme moving forward is going to get complicated - X was chosen because it's the 10th year anniversary so it makes sense, but what does that mean for the future of the two lines with regards to naming? Will we get an iPhone 9 and an X2 next year or what? It seems a bit crazy having this many devices too - as of right now, the Apple site is showing iPhone SE, iPhone 6S, iPhone 7, iPhone 8 and iPhone X - too many SKUs so it'll be interesting to see which ones do get dropped or if they'll keep them all to cover various price points.

Well, they'll always continue to sell older models at lower price points - most of that is probably unsold stock? A guess would be this year we'll have the 8 and X (or 10), with relatively poor availability of the latter. In 2018 we'll have the 9 and Xs with availability being a bit better, then by 2019 it'll just be the XI or whatever it'll be called as they'll have either have an alternative to Samsung for sourcing the OLED displays or just have scaled up production enough to get the numbers to meet demand and this new design will be the standard iPhone configuration.

 

[TallPaul1878]

Apple ARE trying to price gouge their customers with the iPhone X. They are testing the waters with a new price point and if people jump all over it and gobble up £1000 phones then they have set a new precedent and all new phones will be expected to cost £1000. If customer reject the idea then Apple will be forced to maintain the current pricing structure.

Apple know that their customers are heavily invested in their products. Many of them have multiple devices that share the same ecosystem and they know that many would be reluctant to relinquish that luxury.

I don't own a single Apple product but I know that if I had spent money on music from iTunes and games from the App Store then I'd be a little less inclined to ditch all that to move over to Android

 

[Regy53]

another issue with costs is the pound being so weak at the moment, no idea how it would work but i assume the phones are imported.

 

[DarkHorizon472]

Apple ARE trying to price gouge their customers with the iPhone X. They are testing the waters with a new price point and if people jump all over it and gobble up £1000 phones then they have set a new precedent and all new phones will be expected to cost £1000. If customer reject the idea then Apple will be forced to maintain the current pricing structure.

Apple know that their customers are heavily invested in their products. Many of them have multiple devices that share the same ecosystem and they know that many would be reluctant to relinquish that luxury.

I don't own a single Apple product but I know that if I had spent money on music from iTunes and games from the App Store then I'd be a little less inclined to ditch all that to move over to Android

That is very true, we have multiple Apple devices which work well together but you would have a lot of change from £1,000 if you paid the prices we did combined for the whole lot.