Why Apple launched two distinct models — iPhone 8 and iPhone X?

iPhone X in IndiaDevices major Apple has unveiled two distinct iPhone models — iPhone 8, iPhone 8+ and the costly iPhone X for ensuring its own future.

Apple said iPhone 8 and iPhone 8 Plus phones will be available in space gray, silver and gold finish in increased 64GB and 256GB capacity models starting at $699.

The price of Apple’s expensive iPhone X will be $999 — available in silver and space gray in 64GB and 256GB models. The starting price of $999 for iPhone X is only $33 more than the previously most expensive iPhone, the 7 Plus 256GB. Samsung has a flagship for $999.

“Apple has fallen victim to its own success. While the first iPhone model announced 10 years ago set Apple apart from other mobile phone makers as the pioneer in smartphones, its market leadership quickly diminished as hundreds of other companies introduced their own products,” said Jeff Orr, research director at ABI Research.

Apple risks losing iPhone 8 sales in advance of iPhone X availability. Analysts are saying it is the right decision of Apple to announce iPhone X now.

“Keeping it quiet until a second product launch this autumn would alienate iPhone 8 purchasers and damage Apple’s business in the long run. Apple has made the right decision for its customers. They have a clear choice: buy an iPhone 8 or 8 Plus now and enjoy Touch ID, wireless charging and improved performance – or wait and spend more on iPhone X in a month’s time,” said Ian Fogg, senior director, mobile & telecom, IHS Markit.

Analysts say Apple must respond to the needs of multiple constituents, including financial investors and consumers. Financial investors want to increase profitability. Consumers want to participate in the adoption and use of new technologies. However, iPhone has not been accessible to all world markets.
Samsung smartphone share in Q1 2017
Apple earlier faced challenges in non-LTE markets. Poor speed on 2G and 3G networks did not attract users to opt for high-end iPhones from Apple. The other challenge was to attract India and other emerging markets to its relatively costly smartphones.

Apple CEO Tim Cook is expecting that 4G customers of Bharti Airtel, Reliance Jio, Vodafone and Idea Cellular will be picking up the latest iPhones. In the last 12 months, India added several million 4G users.

Though Apple announced two different entry-level iPhones — iPhone C and iPhone SE — price-sensitive markets, such as India, did not buy iPhone in large volumes.

Apple is responding to these challenges by launching iPhone X (pronounced “ten”) by establishing a new value level for Apple customers that want a premium, futuristic device. Apple announced a new price point to reflect the flagship nature of iPhone X.

This new class of iPhone affords Apple the opportunity to separate market expectations. Apple can prioritize low-cost iPhone solutions, such as the iPhone SE, for markets including India. iPhone X enhances the profitability for Apple smartphones, which will offset the downward price pressure and profitability at the low end of the market.

Supply chain rumors have expressed concern that iPhone X is not yet yielding production volumes at similar levels to previous iPhone introductions. ABI Research expects supplies of the new premium models to be limited through 2017 and into the first half of calendar year 2018.

Apple has the best iPhone sales when a new model has a markedly different design. The iPhone X delivers a design unlike any other existing smartphone because the display is edge to edge on all four sides. The best the competition has achieved is on just three.

“But Apple is hoping the later availability date for iPhone X will not affect iPhone 8 sales this quarter. Apple’s lower iPhone 8 pricing should limit the impact, but it remains a risk. iPhone X is the future of smartphone design, but it’s also available in the future too,” said Ian Fogg, senior director, mobile & telecom, IHS Markit.

Apple pricing strategy 

The starting price of $999 for iPhone X is only $33 more than the previously most expensive iPhone, the 7 Plus 256GB.

Apple has succeeded with all previous iPhone models leading to the highest average selling price (ASP) in the smartphone market. When the first iPhone went on sale in mid-2007 Apple had success with an ASP which was five times greater than the largest handset maker at the time (Nokia). Apple is the most successful smartphone maker because of its revenues, not its 1.2 billion iPhone shipments over the last decade.

Ten years ago, then mobile handset market leader Nokia had an average selling price for its mobile handsets of just $113 (€82). In Q2, 2017 Apple’s ASP was $606, over five times Nokia’s ten years ago pre-iPhone. While other handset makers have also increased their ASP in the last decade, no one has been as successful as Apple: the current market leader by shipment volume, Samsung, has an ASP slightly over one third Apple’s.

Baburajan K