Despite numerous previous news indicating that the new generation of iPhones would be priced upwards, the final price announced at the launch event early this morning was a relief to many. Except for the new model iPhone 14 Plus, the starting prices of the remaining three models remain exactly the same as their predecessors. However, at a time when the cost of materials in the industry chain has increased significantly, maintaining pricing seems to require users to pay a price, such as the iPhone 14/14 Plus directly following the previous generation’s A15 chip.
I have to say, this behavior is indeed “very Apple”. Just like the previous cancellation of the charging plug, until today no Android manufacturers dare to take this risky step, not to mention the use of the previous generation of SoC, a few years ago Android manufacturers are not using X-axis vibration motors enough to attract a wave of verbal criticism.
Of course, Apple’s competitiveness for the Android camp will not be weakened. On the one hand, the A15 Bionic chip is still difficult for Android flagship SoCs to match in terms of performance and energy consumption. On the other hand, Apple has adjusted the pricing strategy of its product portfolio, so that the different versions and memory capacity of the models just stuck in the consumer demand expectations, which can be described as a superb knife.
Among the new iPhone series, the only one that has been widely criticized is the basic iPhone 14. As the backbone of the previous two generations, this model has long held a share of more than 50% of Apple’s new model sales. And on the new generation of the basic iPhone 14, the upgrades that require a magnifying glass to find seem to tell users, “Don’t buy it, it’s not worth it.”
Just earlier this month, industry analyst firm Counterpoint Research released a new report showing that Apple’s smartphone market share in the U.S. exceeded 50 percent for the first time in the second quarter of 2022, surpassing Android phones to become No. 1.
This is an important historical point, as the world’s highest smartphone penetration rate in the past ten years, Android with open, free features in the U.S. cell phone market steadily overpowers iOS. But at this moment, Apple is choosing to “swing” on its own products, which seems to be unconventional.
The only explanation is that the “basic iPhone” has ended the role that Apple gave it.
iPhone needs a price anchor
The biggest change in the new generation of the iPhone is the removal of the original mini model, which was a “hit but not a miss,” and the return of the Plus model, which was so well received during the iPhone 6/6S era.
The iPhone mini is considered by some to be the biggest failure in iPhone history, as the iPhone 12 mini accounted for 6% of shipments after its release, and by the time the iPhone 13 mini was released, that number had dropped to 3%.
One thing to note is that the mini model’s material costs are not cheaper than the “base model”.
On the one hand, Apple needs to create a new mold for the mini model, and a different size of the device to fit the small body. On the other hand, individual components are actually “more expensive the smaller they are,” such as MIM (metal powder injection molding) components.
This begs the question: Why did Apple insist on continuing the iteration of the iPhone 12 mini in the 13 series after it was priced cheaply and material costs did not drop?
The reason is that the two generations of mini models exist not only to meet the needs of “small screen enthusiasts” but also to serve as a price anchor.
Take the iPhone 12 series, for example, the biggest improvement over its predecessor is the support for 5G communication, and the corresponding starting price has been raised from $699 to $799 for the previous iPhone 11.
But the problem is, this is already October 2020, and the Android camp 5G flagship models have been updated in two batches, just because the addition of 5G communication is difficult to convince consumers to pay for the additional $100.
At this time, the mini model “price anchor” attribute is particularly critical. Because the shortcomings of this “small screen flagship” are intolerable for some users.
The message Apple wants to send to users is: compared to the $699 iPhone 12 mini model, the iPhone 12 supports dual SIM, has a larger screen and longer battery life, so looking at the extra $100 is not a good deal.
And in this generation of iPhone 14 models, Apple’s biggest concern is how to stabilize product pricing.
Compared with the smartphone industry in the previous two years, the current competitive landscape of the industry is very cruel: the bonus period of the 5G replacement wave has long worn off, there is already a clear innovation bottleneck in the industry, and the demand in the consumer electronics market is getting weaker.
In this context, Apple can’t raise the price of its entire lineup with just one technology boost or one concept release as it did in the past. But at the same time, global inflation has raised the cost of materials across the industry chain, so if it wants to keep profits, it can only move on the relatively entry-level iPhone 14/14 Plus, allowing these two models to reduce hardware costs by using stock SoCs while keeping the starting price the same.
Of course, as mentioned above, if the mini model is retained in this generation, its hardware costs may even be higher than the base model, and with the embarrassing sales of the previous two mini models, there is no reason to retain the mini model.
The iPhone needs a new price anchor point, and this task naturally falls on the shoulders of the basic iPhone 14.
So we can see that this generation of iPhone 14 is almost without any upgrades, except for the front camera with more light intake, larger CMOS, and satellite communication, almost all the feature upgrades mentioned at the launch can be achieved through OTA.
The basic iPhone 14 is the most lackluster model in Apple’s history, but that’s what Apple wants to see.
If Apple tells users “we use the previous generation chip in the new model, but the price is not increased”, this is unacceptable to users, but if Apple says “you can upgrade to a larger screen iPhone for only $100 more”, I am afraid it will be understood by some users. Users will understand.
Does the iPhone still have the advantage?
Although Apple uses “stock SoC” in iPhone 14/14 Plus models, it does not mean that the competitiveness of the iPhone will be weakened.
As of now, the 5GPU version of the A15 Bionic is still significantly ahead of its Qualcomm counterpart in terms of performance. In 3D Mark’s Wild Life test, the iPhone 13 Pro with this chip is about 15% higher than the Snapdragon 8+. In the CPU test, especially in single-core performance, the former is a crushing advantage over the latter, a situation that may not be reversed even after the release of the Snapdragon 8 Gen2.
What’s more, this new generation joining the iPhone 14 Plus has all the potential to become a phenomenal product.
In 2014, IDC had statistics on iPhone 6/6 Plus sales data. In the first six weeks of this model’s release, iPhone 6 Plus shipments accounted for as much as 60% of the total, which strengthened Apple’s determination to move closer to larger screens thereafter.
But after the iPhone 11 model, the price difference between the larger iPhone 11 Pro Max and the base version was too large, which began to reduce the share of larger iPhone shipments, a problem that continues to this day. Of course, the Pro Max model cannot simply be interpreted as a “larger screen version of the iPhone”, as many features, especially video, have been significantly improved over the Pro Max generations.
However, for many consumers, they do not have a “cinematic camera” type of demand, they simply need a larger screen size than 6.1 inches to accommodate the stacked gestures in the system. So in this context, the iPhone 14 Plus is perfectly capable of meeting their needs at a lower price.
In addition, Apple’s attention to the iPhone 14 Pro/14 Pro Max models has significantly increased in this generation of iPhone.
In terms of software, although Apple still uses the “pill screen” that has been repeatedly flogged by some OCD users, the design of the “island” is a real eye-opener. Advantages. However, now the pressure comes to the side of application developers, how to design a widget for this “island” to fit the application, this is the problem they need to face.
The design of “Agile Island” is amazing
In terms of hardware, Apple did not reveal at the press conference how drastic the performance of the A16 Bionic is compared to its predecessor, but it is certain that the cost of this generation of SoCs must be much higher than that of the A15 Bionic.
As early as the third quarter of last year, TSMC had said that the price of its chip foundry services would increase by 10-15%. In February this year, according to the Economic Times, in order to ensure the restructuring of the capacity of the new iPhone and other devices, Apple accepted the price increase and chartered TSMC 120,000-150,000 pieces of 4nm production capacity, and the average price of this batch of chips will also rise 8%-10% compared to the previous.
In fact, the margins of the two iPhone Pro/Pro Max models are not much higher than those of the basic iPhone.
Previously, Tom’s Guide had done a teardown of the iPhone 13 series models, reporting that the 256GB capacity iPhone 13 Pro Max, priced at $1,199, cost $438 in materials, accounting for 36.5% of the cost; iPhone 13 512GB priced at $1,099, costing about $407 in materials, accounting for 37.1% of the cost. The iPhone 13 512GB is priced at $1,099, with a material cost of about $407, or 37.1 percent of the cost, which is not much different from each other.
On the premise that chip prices have risen sharply, Apple is able to ensure that its starting price is the same as that of its predecessor, which is rare. It can be seen that in the face of the current red sea competition in the smartphone industry, Apple prefers to let the iPhone 14 Pro/Pro Max two high-end models hold up the market, although its hardware costs have increased significantly.
Of course, with net profit shrinking year-on-year in the third fiscal quarter of 2022, Apple won’t allow margins to decrease further, so Apple once again showed its superb knife skills: boosting the price difference between different memory versions, after all, although the starting price remains unchanged, 128GB of memory has become increasingly insufficient.
At the end of this launch, Bloomberg reporter Mark Gurman posted, “The iPhone generally retains its previous appearance while adding camera capabilities, additional satellite messaging capabilities, and the design of the Spirit Island. Apple’s bet on these new features, coupled with the lack of significant price increases, is enough to fend off competition from Samsung Electronics Co. and other smartphone rivals.”
Although Mark Gurman, the “fruit blower,” may not be objective enough in his stance, Cook said during a previous earnings call that the number of active iPhone devices hit an all-time high in all regions in the third quarter of fiscal 2022. He also highlighted that a record number of users converted to the iPhone as well.
For now, Apple is still hard to find a rival in the $699+ price segment.
