Why Is The iPhone X So Expensive?

The iPhone X was revealed with much fanfare in Apple's new Cupertino HQ last week- but it wasn't just the personalised poop emojis, the wireless charging or the new display that stole the headlines...

The all-new iPhone X was proudly revealed by Apple CEO Tim Cook as the "biggest leap forward since the original iPhone". The device, which marks the 10-year anniversary of the iconic smartphone, features an all-new bezel-less OLED display, 'Face ID'- the most advanced facial recognition technology on a smartphone- and other new updates such as wireless charging.

Not only was iPhone X arguably the biggest leap in technology since the original iPhone, but it was in fact the greatest leap in price- at $999 dollars, it became the most expensive mass-market smartphone ever, $230 up from the iPhone 7 Plus. This significant price increase, and the landmark of the iPhone X becoming the first ever thousand-dollar smartphone, remains a significant talking point of the new device- and most of the coverage around the price has been negative. So, why exactly have Apple made the iPhone X so expensive?

The most obvious contributor to the increase in sale price is the increase in the cost of production. According to GSM Arena, the X costs $412.75 to produce- compared to the $220 production cost of the iPhone 7. This drastic increase in cost is the result of a significantly larger, OLED display, a new glass material, and also a larger standard storage of 64GB for the base iPhone X.

Interestingly, the only place Apple could source the new OLED display was from its smartphone rivals Samsung- no doubt, the Korean firm will have exercised this monopoly power to try to reduce the margins of its competitor.

The new design and technologies of the iPhone X has also limited production capacity. This is rumoured to be one of the reasons why there have only two colours offered at launch, as well as why the actual sale date is in November, despite the announcement coming in early September. As basic economics dictates, a lower supply is likely to induce higher prices, as people clamour to not miss out on this latest iPhone.

While this price increase is rather drastic, people often forget that it's not the first time Apple have introduced devices at a high price. Apple believe that the iPhone X is a whole new device- an iPad Pro to the iPad that is the iPhone 8, or a MacBook Pro to the iPhone 8's MacBook. This is especially evident when you see that the prices of the iPhone 8 and 8 Plus have actually increased from the iPhone 7 and 7 Plus.

The first MacBook Air (top) was succeeded by a
more successful and affordable generation.
Source: Engadget

Historically, new Apple products as revolutionary as the iPhone X have provoked controversy due to their costs- the first generation MacBook Air, the 2015 MacBook and the Apple Watch are just three such devices. Experiences from these products have arguably given Apple the confidence to set a high price for the new iPhone. Where successful, Apple have been able to sell high volumes at high prices- and in slightly less successful cases, such as the launch of the first MacBook Air, Apple reduced prices over time as the new technology introduced became standardised in its line-up.

Apple knows that many people unwilling to pay $999 for the iPhone X will opt for the cheaper iPhone 8 instead- and this doesn't necessarily present a financial loss to Apple, given the lower production cost of the latter device.

And Apple also knows people will still buy the iPhone X. The massive marketing buzz around the product, and the sheer difference it represents from the usual iPhone lineup means that the device is undoubtedly going to sell in high volumes. It's likely, in fact, that the higher $999 price will be attractive to many customers. At a sub-conscious level, the round pricing of $999, essentially a thousand dollars, the idea of having a thousand dollar device will appeal to people who may want to own the device as a status symbol as well as a phone.

This type of product is known as a Veblen good- a product for which demand increases with price, in contrast to standard economics. At a sub-conscious level, the round pricing of $999, essentially a thousand dollars, the idea of having a thousand dollar device will appeal to people who may want to own the device as a status symbol as well as a phone.

A high pricing brings other potential smaller benefits for Apple. For example, when people spend as much as $999, the smaller purchases seem even smaller, and thus more appealing, to the buyer. For example, spending $100 on Apple's new AirPower wireless charging station seems less of an expense when you've spent $999 on an iPhone X than when you've spent $500 on a previous generation iPhone.

So while the increased production costs have introduced a necessity for Apple to raise the sale price of the iPhone for the new iPhone X, the decision to increase the price to as high as $999 is likely to prove a shrewd business decision for Apple, especially given the release of an updated iPhone 8 at a cheaper price. What remains to be seen, however, is whether Apple will eventually reduce the price of future generations of the iPhone X, as its technology becomes standardised in the iPhone range, or whether Apple is preparing the market for a shift to a new level of price for smartphones.

iPhone 6, Apple Watch: why today, Apple will the centre of the world's attention.

Tuesday September 9th will be a huge day for the technology industry worldwide.
One of Apple's famous presentations will be made in just a few days, in front of selected journalists and no doubt thousands of online spectators, who will be waiting with bated breath to hear what exactly the largest publicly traded corporation in the world has up its sleeve.

Apple hasn't made any major hardware announcements this year- so what can we expect after all this silence from the technology giant?
Let's explore two rumoured products.


iPhone 6
Perhaps one of Apple's less secret revelations, the iPhone 6 is a shoe-in to be announced on Tuesday. Rumours suggest Apple will not announce one but two models- both of which will sport larger displays, up from the iPhone 5S' 4-inch to 4.7 and 5.5 versions.

The new models are expected to have a new case design also, which, following previous trends, will most probably be thinner than its predecessor (at this rate what will the iPhone 16 be, a sheet of paper??).

Another key rumoured addition will be that of NFC- Near-Field Communication. This technology basically allows devices to communicate with each other within a short distance, but Apple's specific application of this that is expected to create most waves in the tech community is how it could make the iPhone 6 into a 'digital wallet'- allowing you to simply use your phones at a checkout to pay for your shopping, just as you would a credit card.
Commentators expect Apple to pioneer further the digitalisation of commerce- we've already seen online payments grow hugely, and now it could be time for digital real world payments to lift off.

iWatch
A product that has been rumoured for almost forever, but is not quite as certain to be announced as the iPhone 6. The general consensus among the tech community is that Apple may announce the legendary device in Tuesday's event, but hold sales until early 2015.
Despite the fact it has not even been announced yet, the iWatch has gained a huge following. Many expect it to be the product that launches off another technology product category, just as the iPad kicked off the tablet market in 2010, or the iPhone in 2007.
The iWatch is expected to act like a mini phone- relaying emails, messages, notifications and whatnot to your wrist- rumours suggest it may even allow you to view maps and receive navigation.
Apple is also rumoured to set fitness as a key component of the iWatch- with health applications such as Apple's Healthkit and the Nike+ app, and numerous sensors for various bodily measurements, set to be key attractions in the device.

And what's more, we could even see the aforementioned NFC make its way to the iWatch- meaning you could pay for your daily coffee with your watch!

Perhaps you've noted this article to be not quite the usual poponomics article- where is the economics, or business in this? Well, here we come to the juicy bit. Listen up.

The iPhone 6's larger displays? The Samsung Galaxy S5 currently on sale worldwide already has a 5.1 inch display, bigger than the expected 4.7 inch iPhone. The HTC One Max has a whopping 5.9 inch display, larger than the 5.5 iPhone.

NFC on the iPhone? Not a big deal. The Google Nexus 7 had that two years ago, and via Google Wallet you can already perform touch and pay payments.

Heard of this before? Don't blame you...

The iWatch- the first digital watch companion? Wrong again Bob- the past year has been chock full of watch announcements, from Samsung, from Motorola, and various other tech companies. They can relay notifications, they can monitor your heart rate, and they've been out for ages- heck, Samsung has already released two iterations of its Samsung Galaxy Gear.

But if you don't follow tech closely, you may not have heard of Samsung's Gear (which was first announced a year ago), or Motorola's 360 smartwatch, yet you've probably heard of Apple's iWatch, which we don't actually know exists yet. Isn't this weird? Why is this?

There are numerous reasons. Many indeed. A key reason is of course the quality and consistency of Apple's product environment, and the products themselves- but Apple's business strategy also has been hugely successful.

Apple has built for itself a truly iconic brand. An Apple logo, be it on an iPod nano, an iPhone or a 27-inch iMac, carries with it connotations of high quality materials (note how commonly that silver aluminium material is used in Apple products), luxury (take a look at some of Apple's prices) and reliability (most Apple product owners would agree on this one).

A large part of this has been thanks to consistency- a key factor in a business' success, but only if it is done right- of course no company should be creating consistently poor products (*cough*Blackberry*cough*).

Apple has created consistency at every corner of its business. Take a look at the two screenshots from Apple's webpage above, and the event invite at the top of the article. The same font (Helvetica Light I am led to believe) is used consistently, the same white-grey colours, the same minimalist design in general is consistent throughout most of Apple's site.
Of course certain products are given their own display style reflective of the product's character, but in general Apple's design (be it the design of the site, the design of the advertisements or the design of the products themselves) are all cohesive. They are certainly decisively minimalist- Apple doesn't make use of any cheesy patterns or frilly designs, it just selects one or two colours and sticks with it throughout the product. And this is throughout Apple's whole product line.
The Mac line is a particularly good example of such consistency- the distinctive aluminium material used as the outer shell for the devices act as a cohesive for all Macs- it links them all together, it lets you know that an iMac is from the same family as a Mac Mini. Not only is this beneficial from a design standpoint, but it creates a subtle familiarity in product users, one that makes people more comfortable in purchasing a second or third or fourth Mac computer.

Consistency spreads further than just the design of Apple products- Apple's retail stores are among the most valuable in the world, thanks largely to their design. Apple makes use of the same materials for all the tables, the walls to give customers familiarity and comfort in their environment- while still allowing for stores to have their own individual appeal (such as the Regent Street store in London).

Consistency goes into the use of the products, too- Apple is well known for its lack of device software fragmentation (basically most Apple users are always running the same latest software on their devices, as opposed to say Android where people are spread across numerous iterations of the software, or Windows where many people are still running XP), its iCloud service allows people to access photos and videos across all of their devices without having to transfer anything manually, and features of the upcoming Mac OSX computer operating system will allow Mac users to send and receive phone calls and text messages on their computers- provided there is an iPhone connected to the same wifi network.
This feature, named Continuity, is another genius move from Apple. Creating this greater connection between the Mac and iPhone is a very effective way of attracting customers to purchase both- as items that complement each other rather than separate items completely. This could easily sway an iPhone user to purchase a Mac, and vice versa.

Through design, brand and functioning consistency Apple is successfully crafting not just a line of products but more an environment of products, all related and cooperative with one another.

We know this, perhaps unawarely, but this expectation of consistency that many people have come to associate with Apple is perhaps the greatest reason why we are so interested in the rumoured iWatch and the iPhone 6, despite the apparent competence of these products' already existent competitors.

Consistency is key in a business- and clearly for Apple, when combined with quality products, it has paid dividends, big time.

SOURCES (and recommended reads):
apple.com
http://www.techradar.com/reviews/phones/mobile-phones/samsung-galaxy-s5-1226990/review 
http://www.htc.com/uk/smartphones/htc-one-max/
http://techcrunch.com/2014/09/06/apple-iphone-6-event-predictions/
http://www.engadget.com/2014/09/05/what-to-expect-when-youre-expecting-an-iphone-6-or-iwatch/
http://www.cnet.com/how-to/how-nfc-works-and-mobile-payments/