Are iPhones too cheap?

Prices for the iPhone 18 Pro and Duo are lower than expected

When the iPhone Duo price was announced in the Steve Jobs theater I was the only one applauding.

Prior to the Duo bombshell, the iPhone 18 Pro prices were announced to be a mere $100 higher than the iPhone 17 Pro and the Apple watch prices were kept steady while the AirPods prices actually came down (for one of the cases).

A stunned silence was clearly warranted but applause?

Of course, these are the starting prices and the higher memory/storage configurations are sharply higher. The top of the iPhone price range is now $3200. 1

The base price is however the one most talked about. Ignoring for a moment the financing options (and taxes, AppleCare, non-US pricing and even accessories), are we to think that the iPhone is too expensive or is it too cheap?

Bank of America analyst Wamsi Mohan seems to think Apple made it too cheap. He cut his price target on the shares on account of there being a likely drop in margins (though an increase in volumes.) He had expected a $2,099 Duo and price increases of $150 to $200 on the Pro base models.

I had expected a 10% to 15% increase on the iPhone. On an equivalent 17->18 comparison, the price increases for the same memory configurations were as follows:

Note that there was no 17 Pro 2048 option so the 18 Pro 2048 has no comparison.

The average (unweighted) price increase was 14%, within my expectations. However, the lower memory configurations are more popular, the 256Gb and 512Gb models saw increases below 10%.2 I expect these are far more popular, putting the weighted average price increase close to 10%.

On that basis the price increases were lower than I had expected.

But there’s more price increases to consider. The iPhone 17, Air, and 17e and 16 continue to be sold and they all received price increases. These increases are shown in the following graph:

Here the increases are typically higher, with an average of 17% and a maximum of 30%. And these are not “better” versions, as in the case of the 17->18 Pros. These are the same exact products. The increase on the Air 512 is the most modest and probably the best deal, again suggesting that the 512 configuration is the most economical, perhaps due to scale. 3

The Duo is out of scope of this comparison but there have been “leaks” suggesting that the $1999 price was chosen years ago to anchor the product implying that the memory catastrophe is being ignored for now. One does not need a leak to consider the anchor price logical and consistent with history of the product.4

What does this analysis suggest about ASP and volumes?

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