Apple is expected to break the average price of the standard iPhone twice in the coming months as customers choose to buy more expensive “Pro” models that boost the tech giant’s margins.
Demand for the new iPhone 14 revealed earlier this month is already strong enough to predict that the global “average selling price” – or ASP – will rise to $892 in the September quarter and $944 in the December quarter, according to Counterpoint. Research, the data provider, who bases its forecasts on consumer demand, market information, and talks with suppliers.
The current record is $873, which was achieved in the last quarter of last year.
The average selling price of iPhones is a key metric for Apple on Wall Street, where smartphone sales still account for about 50 percent of the group’s revenue. The upward trajectory of those prices — from just $690 in late 2015 — is all the more significant given that Apple chose not to increase the prices of its devices earlier this month at its annual flagship product launch, a decision some analysts called the biggest surprise of the event.
Driving this trend is the popularity of the iPhone 14 Pro and Pro Max models, which feature a faster chip, 48-megapixel camera, and a new info center called “Dynamic Island”.
When research group Evercore ISI surveyed nearly 4,000 consumers this month, it found that 56 percent of those likely to buy an iPhone planned to buy a Pro model, compared to 41 percent last year. It expects ASP prices next year to be around $940, 10 percent higher than the iPhone 13 cycle.
“We are increasing our estimates of iPhone revenue for the next four quarters on the back of stronger-than-expected ASPs,” Evercore analyst Amit Darianani told clients.
The numbers suggest that Apple finds itself in a much better position today than it did in January 2019, when it was forced to issue its first revenue warning in 16 years on the back of weak iPhone sales in China.
It has since captured more market share in China thanks to the launch of 5G-enabled iPhones in 2020 and the fall of Huawei, which faltered from selling 5G phones after US sanctions.
Between late 2020 and late 2021, Apple’s market share in China rose from 15.9 percent to 23 percent, according to Counterpoint.
“Other Android manufacturers – Vivo, Oppo and Honor – have all entered the premium product category, but the premium brand position cannot be built overnight,” said Archie Zhang, analyst at Counterpoint.
Globally, the market for premium phones costing more than $400 has outpaced total sales for nine consecutive quarters, with Apple taking 57 percent of the market share last quarter, according to Counterpoint data.
The premium phone segment — phones over $1,000 — nearly doubled in the last quarter of last year, with Apple capturing 78 percent of the market.
The upward trajectory in ASP on iPhone reflects the success of a strategy that Apple started in 2018 when it stopped reporting how many iPhones it was selling each quarter. The move sparked “the height of iPhone concerns,” while Apple argued it was shifting focus from volume to revenue and margins.
Today, analysts believe Apple is in yet another transitional stage of switching from ASP to “lifetime user value” – a strategy to increase revenue from its billion-plus iPhone users with a wide range of services.
In late 2020, the company launched the Apple One, offering a range of Apple services including Music and iCloud for one discounted price. The next logical step is for the iPhone itself to be part of the package, allowing users to pay a monthly fee forever for services and a new smartphone every year or two, without incurring any upfront cost.