There’s no question that an Apple iPhone is an expensive device. The cheapest iPhone 7 will set you back $649. A fully tricked-out iPhone 7 Plus costs $969, which is really expensive for any smartphone.
But if mobile market blogger's prediction becomes reality, the iPhone 8 prices will reach a record high when it's introduced this fall, nearly doubling the price of the current entry-level iPhone.
The speculative report indicates that the iPhone 8 could sell for as much as $1,200 with prices going as high as $1,400 with premium options. Such prices could best be described as insanely expensive for most smartphone buyers today.
In one sense, it’s easy to see how such a price explosion might happen. Apparently some components of the iPhone 8 have been more difficult to produce than expected. For example, edge-to-edge OLED screen production yield rates are lower than planned. The cost of as wireless charging and fingerprint scanner components are also higher than expected.
But apparently there may be other reasons as well, such as an expected high level of demand. There, the thinking goes, the rules of supply and demand kick in, so naturally you’d price the iPhone as high as possible because the supply of parts might be limited. Besides, Apple has always continued to sell its older models at a lower price, so people can still buy iPhones, just not the latest ones.
There will still be buyers for high-end iPhone 8 models even if just a part of the rumored features are there, such as the edge-to-edge screen. However simply charging the highest possible price to maximize revenue and perhaps maintain exclusivity puts Apple in a difficult position. The reason is Samsung.
That company’s current flagship phone, the Galaxy S8, has many of the features that Apple seems to be planning, and it has a suggested retail price of $724.99. Unlike Apple, Samsung allows discounting, meaning that the S8 can be had for nearly $100 than the retail price, which puts it squarely in the price range of the current iPhone 7. It’s worth mentioning that the Galaxy S8 is already shipping, while iPhone 8 is not.
If Apple really does try to sell the new model for $1,200, then it puts itself at a huge disadvantage. While there are many really loyal Apple fans that would buy the latest iPhone even if it meant mortgaging their homes, the vast majority of iPhone buyers aren’t that loyal. While they may be happy with the iPhone, doubling the price is going to lose a lot of buyers.
For Apple, losing a lot of buyers, especially for its flagship phone, is not a trivial matter. Samsung's Android smartphones are already eating Apple’s lunch in terms of market share. To voluntarily give up more market share because some of ill-considered marketing assessments or because of erroneous technical assumptions could hurt Apple even more in the long term. This is especially the case because Apple’s primary competitor, Samsung, isn’t marking up its phone.
Considering that the price of $1,200 for the iPhone 8 is only a rumor, it may simply be that Apple has no intention of selling the iPhone 8 for that much. What may be happening is that Apple has a product and pricing strategy that makes more sense. For example, the iPhone 7S and 7S Plus could be part of that strategy.
By now it's clear that Apple tends to introduce “S” model variants every other year that adds enhancements and features to the existing phone that remains basically the same other ways. The company did this with the iPhone 6 and 6S, for example.
It would make sense for Apple to introduce an iPhone 7S and 7S Plus in September, and at the same time, introduce the iPhone 8 in honor of the iPhone's 10th anniversary.
In that case it would make sense to charge perhaps $100 to $150 more for iPhone 8 than the iPhone 7S. But those price points would still keep it competitive with the MSRP of the Galaxy S8. That might also push the price of a fully-configured iPhone 8 with cellular radios to nearly $1,200, but the starting price would be something many people could afford.
This is a more desirable outcome for Apple. It will help preserve their market share; it will give the company a flagship with some level of exclusivity; and they can sell the 7S and 7S Plus at the same prices as Apple's earlier models. While the 7S Plus and the iPhone 8 would have similar prices, they would be very different devices, and probably wouldn’t cannibalize each other’s sales too much.
Farther down the road as Apple’s supply chain gears up to meet the company’s demand for parts and as other vendors come online to provide critical components such as OLED screens, then Apple can offer more mainstream prices for the iPhone 8 while still marketing a premium flagship device.
The reality is that Apple operates in a market that is more competitive than ever. Pricing itself into oblivion won’t accomplish that.