The $1500 iPhone - is it worth it ?

Sept 12 was 2018's "iPhone Day" - Apples annual event where they announce their new devices.

This year we saw 3 new iPhones - the Xs, Xs Max and Xr.  All 3 had various updates to the core technologies that make up an iPhone as screen size increases.  

What we also saw was a price increase at the top end.  So if you buy an Xs Max with 512GB of storage it will set you back $1,449 + tax - so effectively $1,500+.  

In a recent interview - Tim Cook - Apple's CEO stated that Apple can justify these prices because it "replaces every other gadget consumers might need".  So Tim is referring to things like digital camera's, video recorders, music players, etc.

But does it really ?   And Apple has been kind of on that band wagon for years back when their flagship iPhone 7 for example was about half the price.

My point here is this.  While Apple has always placed itself in a leadership position in the Smartphone marketplace and has positioned it's product line towards the high-end buyer - it has also kind of painted itself into a corner.

The iPhone is Apple.  For example in Q3 of 2018 - iPhone sales generated $29.9B of Apples $53.2B total revenue or 56.14%.  In comparison Mac sales were only $5.3B or 10%.  And while the "Services" category - so things like iTunes, App Store, etc has been growing and is now $9.5B - all pale in comparison.   Apple would not have a market cap of > $1T without the iPhone.

This means that in order for Apple to grow it's top-line revenue to meet executive guidance and market expectations it has to continue to raise prices on the iPhone.  And in some cases quite a bit.  For example last year's high water mark for the iPhone X was $1,249 - now we're at $1,449.   This tells me that in two years we'll be @ nearly $2K for a top of the line iPhone.   

From a sales volume perspective Apple has already fallen to #3 behind Samsung and Huawei and is in jeopardy of falling behind the likes of Xaomi and Oppo.   And while Apple by far takes the lion's share of profits from the Smartphone market - the question will be - where's the tipping point on price.

When will folks say nope - won't buy an iPhone anymore because they're just too expensive.  Even Apple's new "entry" phone the Xr starts @ $749 which is almost the same price of Apple's flagship phones of just 3 years ago.  

And sure with "trade-in" programs and carrier payment programs they'll be folks that will bite - but I checked - my wife's 2017 iPhone 8 plus only carries a $400 trade in value.  

Bottom line is this.  Apple certainly makes a quality product - but with prices for many of their top devices at $1K or above it's going to impact volume and will the price increase make up for that ?  And will folks continue to pay more and more for the iPhone ?   

I say we're approaching the tipping point - and by 2020 - Apple won't have anywhere to go...