Apple’s New iPhones Aim High and Wide
At Apple Inc., simplicity no longer sells.
The tech company may be most famous for its easy-to-use devices, but it once took a very streamlined approach to its product lineup as well. Each year brought one new iPhone model, while the previous year’s version was demoted in price and the others were dropped. But it has been edging away from that practice over the past few years, and Tuesday’s iPhone unveil represents the biggest shift yet. Four new designs under the iPhone 12 moniker were unveiled at different prices, compared with three new iPhone 11 variants introduced last year.
That complexity actually makes sense in a mature smartphone market where one size no longer fits all. Not every buyer wants a massive screen or a professional-level camera. Nor does every buyer want to shell out $1,000 or more for a device that has become a near necessity. And most certainly, not every buyer this year will want to pay up to connect to a 5G network that is still hard to find outside a handful of cities.
Apple’s wide product shot Tuesday reflects an aggressive bet on 5G technology. Every iPhone 12 model announced Tuesday will work on 5G networks —including the hardest-to-find millimeter-wave format operated by Verizon. And even though 5G chips are more expensive, Apple doesn’t seem to be passing the cost on to customers. In fact, the four phones and their various memory configurations announced Tuesday average a price tag 6% lower than last year’s new iPhone models. The most expensive phone in the lineup costs $50 less at $1,399.
That could give a twist to investors’ hopes for a “supercycle” set off by the 5G phones. Lower prices will certainly help sales, especially given other improvements, including wireless charging and a new cover glass called “Ceramic Shield,” designed to reduce breakage.
But Apple’s investors also care deeply about a bottom line that is the envy of the consumer-electronics space. The stock has taken hits before when gross margins fall, and Wall Street hasn’t baked that into the current plan. This helps explain why Apple shares fell more than 2% on Tuesday.
Apple’s gross margins are currently projected to stay flat in the current fiscal year ending next September. Tricks such as no longer including a charger with the new iPhones will likely help Apple offset some of the latest cost pressure. The company just better hope enough iPhone 12 buyers are already set to plug in.