If you follow Apple, you’ve probably noticed Apple’s price increase in the last year. Apple has raised the base price of its product since it introduced the iPhone X.

Many tech pundits have made mention of it lately as well. They tie it into Apple’s flattening iPhone sales and the need to keep the investors happy. While I think that is part of the reason for the price hikes, I don’t think it’s the only one. I just hope that Apple is careful because everyone on the top gets knocked off sometime.

Pleasing The Investors

I don’t feel like Apple is a company that does things to please its investors. Sure, Apple became a company trading for over a billion dollars this year and it has the weight of the expectations of a billion dollar comapny on it, but that doesn’t need to be its only concern.

The iPhone has really been the golden child of Apple since it was announced. It was the future of mobile computing.  Because of the iPhone, the company has soared up the stock charts to take the computer company that could-be to the powerhouse it is now. Investors have jumped on the Apple bandwagon as more and more iPhones were sold, and Apple continued to make more and more money.

(full disclosure, I own some stock in Apple as well.  Which I bought with Robinhood.)

The iPhone has always made the profit chart slope sharply upwards. That spike went almost straight up with the iPhone 6.  There was so much pent-up demand for a bigger phone that sales skyrocketed. Things are starting to flatten out though with iPhone sells. People are holding on to their phones longer.

To combat the lack of sales, Apple seems to have made the iPhone more expensive.

Apple released the iPhone X as a test product it seems. If Apple could make the iPhone more premium than what there was before and charge more, they would continue to see the charts go in a positive trajectory. The iPhone X went on to sell very well.  So the experiment turned out well.

Instead of bringing the price down to sell more phones, Apple created another tier of phones. They created the iPhone XS Max which they could charge even more money for. Now don’t get me wrong, I bought one. I love my Max, but I don’t like paying so much money for it.

By doing this though, Apple has guarded itself against the flattening of iPhone sales. They will still be bringing in the same amount of revenue as before, even though they might not be selling as many.

Tim Cook is a genius when it comes to finances. He was the company’s Chief Financial Officer for years before he became the CEO. I’m sure that he brings some knowledge and desire to keep the investors happy.

When Apple brought Steve Jobs back to Apple, the company was in trouble. Jobs said on his return,

What happened at Apple, to be honest, over the years was the goal used to be to make the best computers in the world. And that was goal one. Goal two, we got from Hewlett-Packard actually which was “we have to make a profit”. Because if we don’t make a profit we can’t do goal one. So, yeah, I mean we enjoyed making a profit, but the purpose of making a profit was so we can make the best computers in the world. Along the way somewhere those two got reversed. The goal is to make a lot of money and well, if we have to make some good computers well ok we’ll do that… ’cause we can make a lot of money doing that. And, it’s very subtle. It’s very subtle at first, but it turns out it’s everything. That one little subtle flip… takes 5 years to see it.

I worry that Job’s thought here is starting to happen again. I really don’t think that it is, but it could be happening. If Apple is keeping its eyes solely on the investors, it will ruin the company.

But I don’t think that it is doing that – but maybe we’ll see in a few years.

Making the Best Products

Interestingly, Apple released a third new phone this year, the iPhone XR ($749) with a lower price than the iPhone XS ($999). The problem with that phone in regards to Apple price increase is that it is still more expensive than the iPhone 8 ($699) that came out the year before.  

But it’s not just the iPhone that’s creeping up. Every line Apple updated with new products this year have seen a price increase.  The new iPad Pros are launching at a $50 dollar heftier price than the 10.5 launched last year.  I don’t think that Apple is making all of these price adjustments to please the investors.  

Plus to upgrade the storage in many of the devices cost even more than before.   While the MacBook Air starts at $1199 – its cheapest modern laptop – it comes with a paltry 128 GB hard drive.  That’s hardly usable for many people, yet the upgrade to 256 GB is $200 more.  

Advancements cost money though.  The new iPhones and iPad Pros with the FaceID sensor and edge to edge screens are some of the best products that Apple has ever launched.  Both are faster than most of the computers out on the market, and Apple is still going.  They are all the next step in computing it seems.

But these types of advances don’t come cheap.  Apple has invested its money into systems that will push everything forward. 

Still, it is hard to forget the hype surrrounding the announcement of the first iPad.  Everyone expected Apple to launch it for thousands of dollars, but Steve Jobs announced they were launching it for $499.

Moving Forward

I do worry that Apple will eventually price itself out of the game. Apple has never been in a race to the bottom.  They have always made the best products they can, and priced them higher than most.

But I’d argue that Apple found its most success when it made the best mass market devices it could.  Many forget that the MacBook Air launched as an expensive product.  Apple even redesigned it and it was still expensive at first.  It wasn’t until they got the price down that the laptop started to fly off the shelf.  

I think the same is true of what’s out there now.  No one really needs a $1000 iPhone.  I bet that the people that buy such an expensive phone will be holding on to that phone for much longer than if the phone was lower.  I probably would have been just as happy with the iPhone XR if it had been the only phone out.  

Right now, Apple’s stragety is to build a cheaper device (the iPad) or keep a device around for a long time (the iPhone 7) to get a device at a low price point.  This is fine for now, but I don’t expect things to really take off again until Apple can make the best mass market devices it can.

If they continue to increase the price, no matter if they are pushing things forward, they will probably start to price themselves out of customers.  

Wrap Up

Apple may be protecting itself from a drop in the stock market (which already seems to be happening), but I don’t think that’s their only options here.

I don’t think that they will lose customers right now over the price hike because the devices they are shipping are still some of the best devices they’ve ever made.  

If the trend continues though, and they don’t try to appeal to the mass market, I don’t think they will reach the heights that they’ve reached before.

What do you think?  Are Apple devices starting to get too expensive for you to buy?  What would the price point be? Finally, do you think these are the best devices that Apple has made?

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