I feel a little burnt. Stayed up until 1 this morning to pre-order the new iPhone’s and Apple Watch’s, couldn’t fall asleep for another hour and was woken up by my kid two hours later.
That’s how I feel now BUT I’m still not sure how I feel about dropping almost 4 thousand dollars on two new iPhone’s and an Apple Watch’s. 4 grand.
After ordering the devices, I had to ask myself: Is Apple HOSING us with new iPhone prices? This was a question I’ve always had in the back of my mind AND after blowing everything in my account on new devices, coupled with the boring updates to the iPhone XS, I decided it was time for me to find an answer to: Is Apple HOSING us with with their pricing?
So is Apple just wringing their consumer base dry year after year? At $1100 dollars, the iPhone XS Max is the worlds most expensive iPhone.
Now as much as I want to get my pitchfork out and light a torch, I can’t. Because I don’t think Apple is hosing us with these iPhone prices. They’re expensive BUT from what I can gather, the prices seem reasonable based on how Apple’s priced their devices previously.
To come to this conclusion, I had to pour a litre of coffee down my gullet after my awful night of sleeping, wait for my bloodshot eyes to go away before sitting in front of my computer to do a bunch nerdy stuff. I do have to warn you, I had to make a lot of graphs for this video.
So here’s what Apple wanted us to pay for every iPhone since 2007. Remember when the iPhone first came out, how appalled everybody was at the $500 dollar price? And that wasn’t even the full price since it was partially subsidized by AT&T.
Now before doing anything else, I went and eliminate the outliers in the chart which were the iPhone 5C and SE. For now anyways and spoiler, the 5C and SE are going to have a big part to play when we compare it with the iPhone XR.
Let’s take into account the inflation as a dollar back in 2007 is not the same as the dollar in 2018. That’s a little more reasonable but the general trend still shows a big price increase over the last few years.
Now Apple doesn’t pocket the entire price of the iPhone as Apple does have to pay for manufacturing costs and component costs.
Notice that the base cost of the iPhone has also increased over the years, which doesn’t sound crazy since there’s more hardware that seems to get added into the device.
Now the margin, which is the difference between fixed cost of the hardware and the price we pay is the left over blue section on the graph.
If we plot that out as a percentage, it generally stays consistent over the years, sitting around the mid-60%’s. Now there is a BIG caveat with this because this is just hardware, I have no idea how to bake in the overhead costs since I don’t know them. If I was to do a bit more theory-crafting, Apple tries to maintain a margin of 40% across all of their products and services so my best guess is that out of $1000 iPhone, 30% goes to parts and 30% goes to overhead. My best guess.
BUT I have shown that Apple hasn’t been going out of their way to gouge us with the prices of the iPhone. They keep adding new hardware features that require more parts and that’s what drives the prices up.
That 30% to 60% margin seems like a LARGE number and some of us might think “Maybe Apple could stop being so greedy about it” BUT why would they? They have a product that nobody else can match so they’re going to charge an arm and leg for it. That’s business.
So has Apple been hosing us on the price of the new iPhone’s? Not really. BUT this still doesn’t make me feel any better dropping 4 grand on new tech ESPECIALLY when the iPhone XS is just so lacklustre in terms of features. When new iPhone’s were consistently under $1000 dollars, I felt that I could spend that even though I didn’t really need them but now that I’m paying close to $1500 dollars, it’s a different story.
At the end of the day, as consumers, we need to think long and hard about what these new devices can offer over slightly older ones. Because honestly, gun to my head, if I had to choose to spend $1800 dollars on an iPhone OR a laptop, I’d go with the laptop. If I had to choose between paying $1800 dollars for an iPhone or an iMac, I’d go with the iMac.
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