No one wants a “cheap” iPhone

The iPhone XR: the odd one out.
The iPhone XR: the odd one out.
Image: AP Photo/Richard Drew
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Apple, for better or worse, is a premium products manufacturer.

A recent report from UBS analysts suggests that there’s a large disconnect between the amount of iPhone Xrs that have been produced and how many people actually want them. The bank has downgraded its target price for Apple’s stock, as its research suggests that more people are choosing to purchase older iPhone models over the new Xr. Apple supplier Broadcom backed up the supposition, saying older models are still in demand, Bloomberg reported Dec. 6.

Apple’s latest phone is a bit of an odd one. It’s cheaper than the iPhone Xs and Xs Max, starting at $749, but it has fewer cameras and a lower-resolution display than its costlier siblings. However, it’s larger than the Xs. Previously, Apple’s cheapest new phone was the $399 iPhone SE, launched in 2016, which was modeled after the iPhone 5’s design. It was much smaller than the iPhone 6s and 7s that were available that year, making it an excellent choice for those who didn’t want to carry around increasingly massive phones. But now, the most affordable option is quite chunky, which is likely what’s causing some people to consider older models. (Apple has stopped selling the SE altogether on its site, but it is still (barely) available in other corners of the web.)

Perhaps as a result of weak sales, Apple is advertising both the iPhone Xr and Xs at seemingly discounted prices on its homepage. It lists the Xr as starting at $449 and the Xs at $699, but both come with little asterisks next to the figures, suggesting there’s more to the story than the listed price. While this is a common practice in advertising (think of all those infomercials that offer something for the low, low price of $19.95—plus shipping and handling, of course), it’s not really something that Apple, a company that has rarely hurt for demand for nearly two decades, has had to stoop to. In this case, the discounted prices were based on trading in your old phone to Apple, which used its going rate for trading in an iPhone 7 Plus in good condition, making this a very specific discount.

Apple wasn’t immediately available to comment on its marketing strategy, or whether iPhone sales were weaker than expected.

On its last quarterly earnings call, Apple announced that it would no longer report how many units of its products it ships, and also posted weaker-than-expected guidance for the current holiday quarter. Some assumed that this was a tacit acknowledgement that Apple isn’t expecting to sell more devices in the future, but rather, just charge its customer base increasingly higher prices. Apple’s revenue has continued to grow as shipment growth has fallen off dramatically in the last few years.

Customers seem to be resigned to either shelling out upwards of $1,000, holding onto their phones for longer, or looking at older models. Perhaps the company’s premium push, positioning itself as a luxury brand, has worked to its detriment. Or maybe Apple just doesn’t do “cheap” well. Its last colorful, supposedly budget, model was the 2013 iPhone 5c, which was billed as “unapologetically plastic” and wasn’t much of discount over the new 5s, rather like the current Xr-Xs similarities. Apple never broke out specific device sales, so it’s not clear if its other small phone, the SE, ever sold in great quantities.

For Apple to keep growing as it has in the past, it’s either going to break into new industries with entirely new products, or start producing lower-cost devices for markets such as China and India, which have proven to be far more price-sensitive. Apple’s brand cachet means little there right now, especially when local manufacturers have new phones that offer everything Apple’s do, and aren’t just marketing them years-old devices. At the same time, Apple won’t want to damage the brand that it’s painstakingly built, which is the most valuable in the world. Growing across the world, while maintaining that luxury status, is no small task.

CEO Tim Cook has said as recently as September that he wants “to make an iPhone for everyone,” and that he understands there’s ”a wide range of what customers are looking for and a wide range of prices that people will pay” for smartphones, it seems Apple’s successes at selling down-market smartphones have been pretty limited, and it’s not clear yet whether that will change with the Xr. But remember, act now! For a limited time, the Xr is only $449!*

*Well, not really.

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