Apple (NASDAQ:AAPL) has been shifting its iPhone pricing round the previous few years. In 2017, it raised the value of the flagship mannequin to $699. It raised the value one other $50 in 2018 with the discharge of the iPhone XR. Final 12 months, it lowered the value for the iPhone 11 again to $699.
Whereas Apple may preserve its value at $699 for this 12 months’s flagship mannequin, it might have a hidden value improve, in accordance with separate stories from two analysts, Ming-Chi Kuo and Dan Ives. The iPhone 12 launched this fall might not come packaged with Apple’s iconic earpods. The transfer can be a delicate option to drive gross sales of Apple’s headphones, together with the favored AirPods and its high-end headphones.
AirPods, a part of the tech big’s wearable phase, have been a big development driver for the corporate. The corporate can be anticipated to launch new high-end headphones later this 12 months.
Apple might get away with out together with headphones
Apple removed the headphone jack on the iPhone in 2016 with the discharge of the iPhone 7. Whereas there was a variety of outcry, shoppers tailored, as did the remainder of the trade. The expansion of wi-fi headphones, together with these made by Apple and its Beats subsidiary, has largely outdated the necessity for a headphone jack on cellular gadgets.
In the meantime, packaging lightning-port headphones with the iPhone for the final 4 years has constructed up a robust provide of earpods succesful to be used in future iPhones. Apple has an enormous put in base of iPhone customers — it is approaching 1 billion — so there’s not an enormous want for an additional set of earpods for a lot of iPhone purchasers.
That mentioned, CEO Tim Cook dinner instructed analysts switchers nonetheless characterize a big share of latest iPhone purchasers through the firm’s third-quarter earnings call final 12 months. An absence of appropriate headphones bundled with the iPhone might trigger the variety of switchers to say no.
Importantly, Apple has made controversial headphone adjustments earlier than, and it navigated via them simply fantastic. Its sturdy model and buyer retention ought to assist it efficiently deal with this alteration as effectively.
An enormous upsell alternative
Apple has a possibility to upsell new clients shopping for the iPhone 12 to high-end headphones just like the AirPods lineup or its over-the-ear wi-fi headphones. Apple might take the chance to supply reductions on its AirPods when bundled with a brand new iPhone buy
Ives expects AirPod gross sales to climb from 65 million final 12 months to 85 million this 12 months, regardless of no anticipated product updates this 12 months. And because of the higher-priced AirPods Professional, it will double the quantity of income generated. By the primary six months of fiscal 2020, Apple’s total wearables income is up 31%.
With excessive expectations for iPhone upgrades with this 12 months’s launch — because of the addition of 5G and a regularly growing old iPhone inhabitants — Apple might have an enormous alternative to promote much more AirPods. When clients are paying over $700 for a brand new cellphone, one other $150 or $250 is quite a bit simpler to justify, particularly if it provides much-needed capabilities to the costly gadget.
Moreover, convincing shoppers to purchase AirPods together with their new iPhone additional locks them into the Apple ecosystem. Whereas AirPods work with most gadgets, they’re designed for Apple merchandise. Subsequently, AirPod homeowners will probably be extra inclined to purchase one other Apple gadget after they’re seeking to improve.
On prime of that, Apple might supply financing or further reductions for purchasers that use the Apple Card to make the acquisition. The Apple Card is one other option to lock shoppers into its ecosystem whereas driving service income via elevated Apple Pay use. (The cardboard earns additional money again for utilizing Apple Pay versus the bodily card.)
General, there are a variety of alternatives for Apple to capitalize on if it leaves earpods out of the iPhone 12 field. On the identical time, the draw back danger for the FAANG stock is minimal.