Forefront Communications

Wall Street Journal: Apple’s Cheaper iPhone Can Still Pay Off

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Sam Belden

Sam Belden

Among this year’s crop of new iPhones, reviewers seem unanimous that less expensive is the better option. Fortunately for Apple Inc., cheaper can still be highly profitable.

Apple introduced the iPhone XR last month alongside two other new iPhone models, but the company tried a new approach this year—it launched the more expensive of the new phones first. The iPhone XS and XS Max models went on sale in late September, just before the end of Apple’s 2018 fiscal year, at prices that started at $999. The iPhone XR hits stores on Friday, starting at a price of $749.

All three models offer mostly the same advancements in terms of processor speed and features such as Face ID, though the cheaper XR uses an older display technology and it has one less camera lens. Analysts still expect it to be the biggest seller of the new models. According to consensus estimates from Visible Alpha, Apple is expected to sell about 80.5 million units of the iPhone XR in the current fiscal year compared with 40.3 million units for the supersized XS Max and 25.6 million units for the XS.

That would appear to make it difficult for Apple to keep boosting the iPhone’s average selling price, which in turn has been a key driver of the company’s growth over the last year. But Apple’s more complicated rollout this year—with three new iPhone models at three different memory configurations —cleverly obscures a notable price bump by adding more higher-priced devices to its lineup. This year’s XR will likely play a similar role as last year’s iPhone 8. Analysts believe it was the top-selling model of that cycle. The iPhone XR’s starting price of $749 is about 7% higher than the starting price of the iPhone 8.

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