Apple's Phones Get Bigger, Pricier -- WSJ
13 September 2018 - 5:02PM
Dow Jones News
Latest models cost $949 on average, 15% more than iPhones
launched a year ago
By Tripp Mickle
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 13, 2018).
CUPERTINO, Calif. -- Apple Inc. on Wednesday unveiled its
biggest and most expensive iPhone lineup ever, making a bet that
larger screens can persuade millions of iPhone owners to not only
upgrade to a new device but also fork over more money than they
spent in past years.
A year removed from the 10th anniversary of a product that
turned it into the world's most valuable company, Apple sought to
enliven its flagship device with standard improvements like
speedier processors and longer-lasting batteries while also touting
innovative features like photo-editing tools and new haptic-touch
technology.
Apple bumped up the price of its highest end phone by $100 with
the introduction of the $1,099 iPhone XS Max, a plus-size, 6.5-inch
version of last year's anniversary model. The new iPhone XS, priced
at $999, costs the same as last year's iPhone X and features the
same 5.8-inch OLED display. And the iPhone XR is a 6.1-inch device
with an edge-to-edge LCD display priced at $749, splitting the
difference between last year's iPhone 8 and iPhone 8 Plus
prices.
The new models are critical to maintaining sales in a
contracting smartphone market where people hold on to devices
longer, and growth of high-price handsets has stagnated. The iPhone
is Apple's most important product, accounting for about two-thirds
of Apple's revenue, which totaled $53.3 billion last quarter.
Though it became the first U.S. company to be valued at more
than $1 trillion last month, tech rival Amazon.com Inc. more
recently hit that milestone and is threatening to unseat the iPhone
maker as the world's most valuable company.
To maintain its corporate perch, Apple must squeeze more money
out of its existing customers. The latest models have an average
selling price of $949, 15% higher than the three phones launched a
year ago.
An estimated 254 million consumers use iPhones that are more
than three years old and 486 million use iPhones that are more than
two years old, according to Piper Jaffray, an asset-management
firm.
Apple is betting it can persuade enough customers to buy a new
device to improve on the 17% increase in iPhone revenue that
analysts predict it will deliver in the fiscal year ending in
September, as the iPhone X's nearly $1,000 price tag offset flat
unit sales.
"Apple is having to run harder just to stand still," said Neil
Mawston of Strategy Analytics. "It's the classic sign of
maturity."
The iPhone remained the star at Wednesday's annual product
showcase, which took place in the new Steve Jobs Theater at Apple's
$5 billion campus. CEO Tim Cook and other executives focused solely
on the iPhone and a new smartwatch, rather than introducing new
versions of Mac computers, iPads or AirPod wireless headphones.
Continuing the bigger-screen trend, Apple's new smartwatch has a
30% larger display than previous models. But the highlight of the
Series 4 watch, starting at $399, is a new electrical sensor that
gives the device electrocardiogram, or ECG, capabilities to measure
a heart's electrical current in 30 seconds. It is the first of the
company's smartwatches to win Food and Drug Administration
clearance, showing the notoriously secretive company is willing to
work with regulators as it pushes into the health industry.
The new feature could help Apple elbow into the
cardiac-monitoring market, valued at $1.4 billion, according to
iRhythm Technologies Inc., which has an ECG product. Apple could
reach a small percentage of that market while also bringing in some
of the 15 million adults over 65 who have irregular heartbeats and
don't know it.
"I don't see this as a game changer for them," said Gene
Mannheimer, an analyst at Dougherty & Co. who focuses on
digital health.
Apple is aiming to offset stagnant unit sales of iPhones with
not only new products like the smartwatch but also from a
fast-growing services business that includes app-store sales,
streaming-music subscriptions and mobile payments. The services
business jumped 26% to $27.2 billion over Apple's first three
fiscal quarters through June.
The bigger screens are expected to help that business line, as
smartphone users with 6-inch screens or larger typically use twice
as many apps as those with 5.5-inch screens and are twice as likely
to watch video daily, according to Kantar Worldpanel.
When Apple last introduced a major increase in display size with
the iPhone 6 Plus in 2014, annual sales of the device the
subsequent fiscal year soared 52% to $155.04 billion and shipments
rose 37% to 231 million units. Few expect it to repeat that feat
this year.
The company this fiscal year will ship an estimated 151 million
units of its three flagship models, flat with the two flagship
models it shipped in fiscal 2015, according to estimates by
Strategy Analytics, a technology research firm. Meanwhile, the
complexity of making three models has reduced its iPhone operating
margins to 30% this year from about 35% in 2015, the firm said.
Write to Tripp Mickle at Tripp.Mickle@wsj.com
(END) Dow Jones Newswires
September 13, 2018 02:47 ET (06:47 GMT)
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