iPhone Xs, Xs Max and Xr: Why Apple needs to get its pricing right for India
In line with industry expectations, Apple on September 12 added three new smartphones to its line-up – the iPhone Xs, Xs Max and Xr. In terms of design and specifications, these smartphones didn't really spring any surprises and turned out to be very much in line with what the rumours and leaks had predicted for weeks leading up to their launch.
These reports turned out to be so accurate that from the display size to the SoC, even the colour and storage options on the new phones turned out to be exactly the same as predicted.
Sadly though, these predictions turned out to be a little off the mark where it matters the most – the price.
As opposed to what trusted analysts such as Ming-Chi Kou predicted, the new iPhones saw themselves being announced at price points that were at least $100-200 above expectations. While the "affordable" iPhone Xr was announced for a not so affordable starting price of $749, it was the top-of-the-line 512GB iPhone Xs Max that really took the cake, with its outrageous price tag of $1449.
Apple's love for India
In India, Apple announced that the long-awaited "affordable" iPhone Xr will be sold at a price of Rs 76,900 for the cheapest 64GB storage variant while the most expensive Apple smartphone in India – the iPhone Xs Max 512GB – would sell for Rs 1,44,900.
An interesting thing to note here is that despite the disparity in incomes and purchasing power between India and the US, in terms of percentage, the most expensive iPhone in India is now over 42 per cent more dearer compared to last year's offering — while this particular jump in US is far less steep at 26 per cent.
How Apple is justifying the price
To justify the increased price, Apple has added a number of new features to the 2018 line-up of iPhones.
To begin with, the most expensive phone in the line-up now comes with a 6.5-inch OLED panel while the smallest of the three devices brings with it a 5.8-inch display. Even the most affordable phone of the lot has been equipped with a 6.1-inch LCD panel.
The internals have been improved too with all three phones now being powered by an A12 Bionic SoC which, Apple claims, is "the smartest and most powerful chip ever in a smartphone". Even in terms of cameras, two of the three phones – iPhone Xs and Xs Max – have been equipped with improved dual camera set-ups that bring with them 12+12 Megapixel Telephoto and Wide Angle lens.
Apple is claiming battery improvements too with the new phones, with the iPhone Xs and Xs Max both providing better batteries than last year's iPhone X.
But are the upgrades worth the jump in price?
Not really.
The fact is, the iPhone Xs and Xs Max are both in ways iterative updates to the iPhone X announced last year, and apart from the Xs Max's gigantic 6.5-inch display, none of the other updates really justify the massive increase in prices.
Despite being an important update, the A12 Bionic SoC bringing a 15 per cent performance gain over last year's A11 chipset is nothing out of the ordinary. Neither is the .2 micron increase in lens size used in "the upgraded camera setup" on the iPhone Xs and Xs Max.
It would also be prudent to consider at this point the fact that, as opposed to last year, RAM and NAND memory prices have also come down significantly and with notched OLED panels also being manufactured in huge numbers, overall manufacturing costs of the new iPhones should have most likely come down in comparison to last year.
Apple setting new horizons
So, if manufacturing costs have come down, and the updates are at best iterative in nature, then why has Apple significantly increased the prices of its 2018 line-up of iPhones?
Well, the answer is because it has stumbled upon a new strategy that could work wonders for it in the short term — but is risky in the long run.
Last year, Apple took a big gamble by moving things up a notch and crossing the $1000 barrier with the iPhone X. Though that decision did lead to the sales of iPhones dropping in many markets, overall, it helped Apple push up the average sale price (ASP) of its iPhones to record levels ($796) and in turn increase its revenues.
By increasing the prices again this year, Apple appears to be sticking to the strategy of inflating its revenues by increasing its margins and not relying on improving sales to put more money into its coffers.
Why Apple's playing a risky game
Despite the strategy working wonders for Apple last year, this strategy is risky at best.
By focusing on inflating the ASP and not sales figures, Apple is playing a short-term game that could very easily backfire on it as it opens it up to the possibility of pricing its phones out of the reach of millions of potential buyers.
Though there is no denying that iPhones have always been premium offerings meant for a select crowd, with the current price tags, even that sub-sect could see itself shrink very fast. Case in point, the iPhone Xs Max which is at a ridiculous price point (Rs 1,44,900) that makes even Samsung's most expensive offering, the Note 9, seem like an affordable option at Rs 84,900.
Even the affordable iPhone Xr that Tim Cook explained is meant for serving a larger audience is so expensive (Rs 76,900) that it makes it a ridiculous phone to buy.
Apple thus needs to take a step back and revisit its pricing strategy.
And, as far as India is concerned, it needs to burn the existing book and figure out a way to price the phones right for the world's second-largest market where many aspirational buyers still await the day when they will take the step up and buy their first proper iPhone.
Until then, I'd just like to wish Apple all the luck in the world. After all, it'll need it in its attempts to sell the "affordable" LCD display and single lens camera-sporting iPhone Xr for upwards of 90k in India.
Also read: Apple should fear losing its Indian customers