The iPhone 6 release will bring a, “more meaningful product refresh,” to iPhone consumers who are looking for a new iPhone in 2014 according to a new analyst report that focuses on Sandisk and the storage of the iPhone 6. The report comes from the same firm that suggests the iPhone 6 price could jump as much as $100 with a release in mid-2014.
For the past several years Apple kept the price of the iPhone stable despite adding new features and a slightly larger display, but with rumors of a larger HD display that may feature a Sapphire component for added durability the company may need to boost the iPhone 6 price to maintain the high profit margins it currently enjoys.
Apple recently increased the price of the iPad mini by $70 when it added a more expensive Retina Display and a faster modern processor. Despite initial complaints of a price increase on social media, demand for the tablet outpaced supply in the first month after release. On the MacBook Pro side of things, Apple included a price jump when adding a Retina Display to the MacBook Pro in 2012, and brought the price down in 2013 after scaling up.
Samsung tried to introduce a price increase for the Samsung Galaxy S4 earlier this year, but AT&T backtracked to offer a 16GB model for $199 like in years past. The Galaxy S5 and the iPhone 5s received numerous discounts from third-party retailers in the months after release, dropping prices by over $100.
We’ll take a look at how Apple may use the iPhone 6 release to increase the price and what this could mean for the iPhone lineup in 2014.
iPhone 6 Display & Sensors Behind Price Bump Rumors
Analysts, leaks and rumors agree on a larger iPhone 6 display. Many suggest Apple is planning a larger display in the 4.8-inch to 5-inch range, though The Wall Street Journal reports Apple is testing screens up to and past 6-inches.
A Bloomberg report from early December cites an unnamed source claiming Apple is working on, “larger displays with glass that curves downward at the edges.” Apple wouldn’t be the first company to test curved displays, but this is the first time we’ve heard of this rumor. The report also claims, “Sensors that can distinguish heavy or light touches on the screen may be incorporated into subsequent models,” from the same source. An Apple patent published earlier this month addresses a curved display.
Apple is fronting money for furnaces to make Sapphire glass for smartphone applications to the tune of over half a billion dollars. The company Apple is working with previously demoed an iPhone with a Sapphire screen in place that didn’t scratch or break when abused with concrete.
A larger, higher-resolution display with a stronger surface and the ability to differentiate touches could easily explain a bump in price.
iPhone 6 Release May Shake Up Pricing
Chris Caso, analyst with Susquehanna Financial Group tells Investors Business Daily, “We see the potential for the iPhone 6 price point to move higher, to avoid the (profit) margin erosion that occurred when iPhone 5 launched,” adding, “we think Apple could get away with a $50 to $100 premium for a larger screen size iPhone 6.”
Apple is reportedly already negotiating with suppliers like SanDisk for the memory that the company will use in the iPhone 6, as another Susquehanna Financial Group analyst suggests Apple is pushing for an iPhone 6 release in June or early Q3 2014. While the price of the memory used in the iPhone is a small component, estimates suggest the 128GB iPad Air option adds $60 to $80 to Apple’s cost.
Another factor to consider is a shift by carriers in paying for most of the iPhone cost with a subsidy. AT&T CEO Randall Stephenson recently told investors, “can’t afford o subsidize devices like that,” referring to simply covering part of the cost of device upgrades. AT&T, T-Mobile, Sprint and Verizon all offer programs to pay the full cost of a phone with faster opportunities to upgrade without a traditional contract in place. Verizon is pushing frontline sales staff to sign up more customers on this plan as they upgrade, reducing the dependency on subsidies and T-Mobile switched completely to this model earlier this year.
These new plans and a lack of subsidies may run against the rumors of a more expensive iPhone 6 as it may be tougher to pass a price bump and unsubsidized costs directly to consumers, but a combination may make it possible.
If Apple uses a larger screen iPhone 6 release to increase the price, we may see a combination of an off contract price bump and a decrease in subsidy could appease carriers and Apple. This is speculation, as iPhone 6 price rumors aren’t specific on the details.
If Apple plans to increase the price of the iPhone, a completely new iPhone 6 with a bigger screen and new design is definitely an easier sell to consumers than the iPhone 5 or iPhone 5s offered the company. Some rumors suggest Apple will launch multiple iPhone 6 screen sizes, one of which would compete with the Galaxy Note 3 in size. The Samsung Galaxy Note 3 retails for $299, which gives Apple room to increase the price to compete in this segment, and anecdotal evidence suggests pent up demand for an iPhone with a large screen.