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Are iPhone Average Sales Prices Increasing?

The most remarkable thing about the iPhone as a technology product is that it has been able to maintain pricing stability for over five years. As the following chart shows, the revenues per unit sold for the iPhone (as reported by the company) have held even as volumes grew exponentially.

The latest version of the product should see no significant change in this pattern. I show below the price spectrum of the iPhone as available unlocked in the US (therefore assuming no sales taxes or VAT and no subsidy). I also highlighted the average revenue per unit from the latest four quarters.

 

The only difference between 2011 and 2012 is that the lowest priced variant is now $450 vs. $375 a year ago.

Without knowing the split between products, it’s hard to tell how much impact this price increase will have. Note that the average price was very nearly the same as the 16GB variant ($643 ASP vs. $649 16G pricing). Assuming equal volumes for each variant, the average pricing for 2011 would have been $634. Therefore the actual ASP was only $9 higher than average pricing.

If we assume the same for this year (equal split between variants + $10) then the average price could rise to about $660. That would be a slight increase but it would be multiplied by many more phones sold.

In fact, going from $634 to $649 and selling 200 million units would imply an additional $3.4 billion in revenue.

  • http://twitter.com/narenbalaji Naren Balaji

    In Jan 2012, only 4% of iPhone sales was estimated to be from 3GS (the lowest model then)
    http://allthingsd.com/20120126/nine-out-of-10-iphone-buyers-are-picking-the-4s/

    • Tatil_S

      Surveys are usually not very reliable, but I remember other indicators that cheaper, older iPhone models are not selling at very large numbers. That is certainly good for ASP and gross margins, but I wonder whether it is a strength or weakness overall, after all that talk about wanting to break into the pre-paid market and not leaving any price umbrellas. It seems Apple is ceding the cheap smartphone market to Android. That strategy turned out well in PCs, so it may turn out well in smartphones, too.

  • steve

    unlocked price does not necessarily equal the wholesale price to carriers though

    • http://www.asymco.com Horace Dediu

      The average of the US prices is very nearly the average global revenue per phone. The revenue number includes some additional sources of income beside the wholesale price like accessories, licensing of Made for iPhone brand and service revenues like those from Google.

  • crustyjusty

    The lack of a $400 iPhone, and large market for sub-$400 smartphones, tells me that Apple will probably address the market from a unique angle. Maybe they’ll add wi-fi calling to the iPod touch, so people don’t need a wireless plan, or Siri will get good enough that they can create a drastically smaller form factor wireless device where input is primarily through voice.

    • DroidJunkie

      Welcome to planet earth!

      While you are visiting we recommend you to check iPod touch gen 1,2,3,4 all of which have wi-fi calling capabilities.

      • crustyjusty

        I’m thinking something like iMessage. Built in and seamless. Are you thinking of Skype and services like that?

      • http://twitter.com/palimondo Pavol Vaskovic

        There is FaceTime on the iPod Touch…

      • crustyjusty

        RIght. Sorry, again, I’m not making myself clear. Just voice calling, without visuals. So, right now, I can’t make calls from my house with my AT&T phone. But I’m at work or at home 95% of the day. So, if I had wifi calling, where people could dial my phone number, and get me on my iPhone, that would be a game changer. Kind of like how iMessage automatically finds out if the end user can be reached through iMessage. If that could happen, I think some folks could do without a cellular plan.

      • newtonrj

        Are you aware of Google Voice, VLingo, Vonage, or Talkatone apps? There is an ecosystem of voice apps on the AppStore today that work with WiFi and iPod/touch. There are users who don’t even know their cell phone numbers, instead relying on their Google/Voice numbers to be cell company & handset phone agnostic.
        -RJ

    • handleym

      Apple is in the enviable position of making 76% of the profit with 17% of the market share. That means essentially monopoly profits without the anti-trust scrutiny that real monopoly affords.

      Suggesting they change this is suggesting that they strive for what, 85% of the profit at the cost of now being watched very closely by at the very least the EU and US Justice Dept; which means all sorts of limitations on how they can tie products together, likely having to open up the phone in various ways (cf MS and the EU browser decision) etc.

      Everyone thinks they can, and should, try to increase their market share. I thimk they are perfectly happy with the current situation. There will be plans (which may or may not need to be activated) to do what is necessary to maintain profitability in places like India and China, but there will be no plan that strives for dramatically increased market share — that just makes no sense.

      • oases

        Apple can sell far more iPhones than they currently do before governments would take punitive action.

      • oases

        Apple can sell far more iPhones than they currently do before governments would take punitive action.

      • oases

        Apple can sell far more iPhones than they currently do before governments would take punitive action.

      • Walt French

        I suspect we all remember Jobs’s famous comment about not leaving a price umbrella for iPad competitors to shelter under, by introducing it at half the expected price.

        It’s not clear to me that reducing the iPhone’s price by $100 would increase sales anywhere near as much as it would cut profit/device, so the idea would NOT be a short-term win.

        It COULD dramatically undercut the opportunity for Android manufacturers to go upscale from the $200 retail price. If Samsung is making roughly a quarter the profit on more devices, a price cut would be a severe challenge to their ability to get any return on their high-end R&D. Firms like Moto that are losing money already would be challenged to be in the business at all. So assuming no issues with regulators — and I agree with the point that Apple, not even the largest brand and well below half of the market, shouldn’t be seen as abusing a monopoly by “predatory” pricing at which it would still be making fat profits — it could be a medium- or long-term win.

        I think the trouble is it goes against Apple’s self-image of offering such a superior product that it doesn’t matter if it’s the highest price: the iPhone, at least in eye of Apple, should be priced to match how well it serves users. And the notion that they are winning their battle to force Samsung et al. into less delightful UXs through IP enforcement must be part of their thinking, too.

      • http://www.facebook.com/profile.php?id=1588068157 Patrick M McMaster

        Jobs willingness to do this may have had more to do with the desire to lock in market share where Apple had less of a technological and marketing lead. He correctly predicted that PC makers would immediately see this product as a challenge to their core product. Could this have been one reason to pursue the cell phone market before the tablet market? The margins on all other products Apple makes is less than the iPhone. The iPhone is the outlier and Horace’s comment about sales channel explains this. I would expect that Apple is working on a lower cost product for the future, but I doubt they will bring it out until the telecom companies cut their subsidies. The golden rule is: “those with the gold makes the rules”. If the telecom companies cut the subsidy, Apple will have only one customer, the individual, rather than the current 2 tier customer relationship with the telecom companies first and direct customers second. I suspect that one of the reasons Apple is having a hard time getting China Telecom to sign on is they are recognizing this trap and trying to avoid it. The China market is still directed by the partially hidden hand of Communism and Crony Capitalism. China Mobile does not have a real fear of losing their market leadership, and they do know how much of a prize they are to Silicon Valley. If they do sign on, I would imagine they will avoid the full extent of subsidies that the rest of the telecoms are paying. So far neither side has blinked because Apple has sufficient market to keep all the factories at full tilt. If Foxconn, can get supply to outstrip demand the equation will shift. Brazil and robotics will need to succeed for this to happen.

        Horace, do you have any data on how large a percentage of the profits from both telecom and handset makers, Apple is pulling in? It looks like they are taking money from both sides of the game.

        On a third front, if they succeed in becoming competitive with Google in the mobile advertising market, and search, then Apple is going to be a black hole sucking up a decent percentage of global profits as a percentage of GDP. All of this is very speculative at this point, but look how far they have come since 1997.

      • Walt French

        I like your breakout of markets save for one—mobile advertising.

        The most wildly optimistic forecast I could find, called for $15 billion of mobile ads in 2016. In contrast, a claim of historical data cited $1.6 billion for 2011. Growing at the claimed 150% rate, $15 billion would be more like 5–6 years down the road.

        And while $15 billion ain’t chump change, it is nothing compared to the current revenue streams of the Big Dog smartphone companies, and also nothing compared to the wireless companies’ revenues.

        I think ad revenues represent the best hope for cottage industry bloggers and so the “open internet” crowd is STRONGLY pro-Google out of direct self-interest. But in fact, the dollars pale by comparison to other ways that services may be paid for.

      • http://www.asymco.com Horace Dediu

        Tracking impact on operators is prohibitively difficult. Not only are there more than 500 but they vary greatly in terms of how they make money and what metrics matter in measuring performance. Much of what passes as telecom industry consulting is trying to explain to them what they do.

  • Sharon_Sharalike

    Asymco is one of the very few sites on the internet at which headlines ending in question mark cannot be automatically answered no.

  • poke

    If you read the iPhone 5 website and watch the video, there’s a strong focus on the manufacturing process, its quality and precision, etc. This has always been a component of what Apple does, but I think this is the first time they’ve really led with it. The phone has other features, such as LTE and the larger display, but what Apple appears to want most to talk about is the finish. Last year the central message was Siri, this year it seems to be “this phone is like a finely-crafted watch.” (Two years ago, with the 4, they compared the design to a camera but the retina display was the main selling point.)

    It seems that Apple thinks it can maintain its pricing through this approach, that craftsmanship is enough to differentiate it from competitors. I think they’re probably (partially) correct – nobody can match them in quality at scale, so that’s a unique selling point – but it’s an interesting direction. Especially surprising is how Jobsian it is. It’s almost like a distillation of what makes Apple different at the cost of alienating the tech media even more. To me, the design of the 5 is almost cocky in its execution. It’s an entirely different process – unibody aluminium – but they’ve gone out of their way to make it look like the 4. It would have been easier to make it look very different. In that sense, it’s boldly conservative. It’s saying, “don’t look at the phone, look at the fit and finish, that’s where we see the value.” I think it says a lot about Apple’s hardware direction going forward.

    • http://www.isophist.com/ Emilio Orione

      Tradition in the design language has also always be a selling point of quality items. Look at cars, watch etc…, luxury cars maintain the same design language trough iteration (mercedes, ferrari and so), while cheaper models rely on the number of different models.
      Apple is also saying: it’s an iphone, the value is in our tradition of making devices, they don’t really need some incredible feature, they just need it to be the last one of a tradition of outstanding devices.

      • oases

        Astute comment, though I’d have pointed to the Porsche 911 instead – a vintage design that is timeless. But what does that imply about market share?

      • pk de cville

        The Porsche 911 is VERY EXPENSIVE.

        iPhone 5, not so much.

        What would the 911′s unit mktshare be if it sold for $35,000?

        What would profitability be if it were the current net per car while selling like “Apple cakes”?

      • Amit Udeshi

        Porsche just had an event here in Japan and I asked why the prices of their low end Boxter were so high, and a country manager said to me that local Porsche owners surveyed don’t want their ownership value diluted by newer models having lower prices to compete with the low end Mercedes-Benz and BMWs.

      • Amit Udeshi

        Porsche just had an event here in Japan and I asked why the prices of their low end Boxter were so high, and a country manager said to me that local Porsche owners surveyed don’t want their ownership value diluted by newer models having lower prices to compete with the low end Mercedes-Benz and BMWs.

      • http://www.asymco.com Horace Dediu

        “The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.”
        Joseph Schumpeter, Capitalism, Socialism and Democracy (1950, 3rd ed.), part II, chapter VII, p. 82.
        I would say it as, any fool can sell luxury to the rich. Finding a way to sell it to the poor requires genius.

      • oases

        I know. In that, Apple is matchless, but sometimes I wish there was a mobile phone IKEA. iPhone’s aren’t really suitable for factory girls, though I know some have them. And anyway, a factory girl can’t afford an Apple compendium of machines and accesories like the middle classes can. Or in more simple terms – I wish there was an Apple that settled for a 15% net margin.

      • kiran bhanushali

        Commoditization through mass production?

      • kankerot

        Expensive health services are sold to the poor as are cosmetic surgeries – neither require genius.
        So Apple sells to the poor. but I thoguht one of the fanboys badges of loyalty was Android was for poor people.

      • http://www.asymco.com Horace Dediu

        Expensive health care is not sold to the poor. The poor are entitled to the care. It would take genius to sell healthcare to all if there was a free market for health service. The absence of any genius is symptomatic of an absence of market forces in the industry.

      • kankerot

        Poor are entitled to the care? That is patently wrong. Go to a third world country and see where this entitlement is or even to the US. Look at access to healthecare.
        It would take genius to sell healthcare to all if there was a free market for health service – No it wouold not.
        The absence of any genius is symptomatic of an absence of market forces in the industry. – What is this? If there are no market forces then there is by defintion no market. There is no interaction between supply and demand.

      • kankerot

        What utter rubbish.
        Ferraris all look different. BMW has just had a major overhaul of its best selling 5 series. As has mercedes across most of its range moving from round to more angular headlights and grills.
        BMW and Mercedes have a huge range of cars.

      • Joe_Winfield_IL

        He said “same design language,” not “same exact design.” Ferraris all look different, but they all look like Ferraris. And the fact that you know of Mercedes as having round headlights illustrates his point exactly. The company is consciously shifting its design language, but the change is not jarring and un-Mercedes-like.

        With this model, Apple is changing the shape of the phone. They are changing the materials that cover 70% of the surface of the phone. They changed the dock connector and the location of the headphone jack. Yet through these major changes, the new product cannot be mistaken for anything other than an Apple product.

      • kankerot

        So what is the Ferrari design language? What constiutes a look of a Ferrari? The 599, 458, California are all different in design language.
        Having round or angular headlights or angular ones is one aspect – like having the same grill – a design language it is not.

      • kankerot

        So what is the Ferrari design language? What constiutes a look of a Ferrari? The 599, 458, California are all different in design language.
        Having round or angular headlights or angular ones is one aspect – like having the same grill – a design language it is not.

      • Walt French

        @kankerot, nobody who wants an honest dialogue starts out saying, “what utter rubbish.”

        Them’s fightin’ words. You want a reputation as a thuggish goon, you got it.

      • orienteer

        How interesting is this, Emilio. The prestige of luxury cars and the like used to be that they were “hand built”, and here, discreetly, a device like the iPhone, as far from handmade as one could imagine, oozes with the values of traditional craftsmanship, and yet this migration from things crafted by hand to purely industrial finesse occurred a long time ago in all our high end goods. I’d say that consumers are hardly aware of it. The lure of the iPhone is aspirational.
        I revisited the episode of Mad Men where the agency wins the Jaguar account (1967-8) with the strategy of “At Last, Something Beautiful You Can Truly Own.” Functionality counts, but maybe this is it.

      • equanimous

        There’s probably more ‘handmaking’ than you imagine

      • kiran bhanushali

        Kinda like high end watches – they all show time, they can all show time. But its the craftsmanship of the high precision swiss watches that connoisseurs pay top dollar for

    • oases

      Astute comment. I’m also impressed by how expansive and expensive the ecosystem is becoming. Talk about barrier to entry.

  • jonas

    I’ve been wondering for the past few weeks why Apple is so stubborn with its iPhone prices and isn’t lowering them to go after a bigger market/market share.
    Their margins are crazy high on the iPhone, they make so much money every quarter and already have so much money in the bank. They don’t seem to know what to do with all that money and it doesn’t look like they’re putting a large portion of it to productive use. Meanwhile (if I’m remembering the data correctly) they are only very slowly gaining market share on a global basis while Android is growing much faster. I think that’s a dangerous position in an ecosystem game. In the last earnings call they even blamed part of the weak performance on the bad economy in Europe and since then it hasn’t gotten any better here. Lower prices would surely help them there.

    So why don’t they lower the price by say 100 dollars across the line? Instead – as outlined above and in your retweets from people around Europe – they even increased some price points.
    Is it because they will sell all the devices they can make anyway? That might be true for the first two quarters but surely not for the second two.
    Is it because they think that Android isn’t really as strong as a ecosystem with lock-in effects as iOS is and they don’t need to worry about market share as long as they make tons of money?
    Are they afraid of overall lower profits per quarter? But they would probably make some of that up in increased volume and also as mentioned above, they’re not doing anything with all that money anyway.
    iPad prices in contrast are more attractive and more competitive and as a result the iPad has a lower margin. What makes the iPhone different?
    Would love to hear some thoughts on that.

  • jonas

    I’ve been wondering for the past few weeks why Apple is so stubborn with its iPhone prices and isn’t lowering them to go after a bigger market/market share.
    Their margins are crazy high on the iPhone, they make so much money every quarter and already have so much money in the bank. They don’t seem to know what to do with all that money and it doesn’t look like they’re putting a large portion of it to productive use. Meanwhile (if I’m remembering the data correctly) they are only very slowly gaining market share on a global basis while Android is growing much faster. I think that’s a dangerous position in an ecosystem game. In the last earnings call they even blamed part of the weak performance on the bad economy in Europe and since then it hasn’t gotten any better here. Lower prices would surely help them there.

    So why don’t they lower the price by say 100 dollars across the line? Instead – as outlined above and in your retweets from people around Europe – they even increased some price points.
    Is it because they will sell all the devices they can make anyway? That might be true for the first two quarters but surely not for the second two.
    Is it because they think that Android isn’t really as strong as a ecosystem with lock-in effects as iOS is and they don’t need to worry about market share as long as they make tons of money?
    Are they afraid of overall lower profits per quarter? But they would probably make some of that up in increased volume and also as mentioned above, they’re not doing anything with all that money anyway.
    iPad prices in contrast are more attractive and more competitive and as a result the iPad has a lower margin. What makes the iPhone different?
    Would love to hear some thoughts on that.

    • Sacto_Joe

      i believe it is more about them selling everything they can make. True, they “fall off” in the fourth quarter (contrary to popular belief their third quarter was quite good year over year), but they really make their money in the first two quarters following release. They have to produce like crazy to match demand, and still know they can’t succeed. And in their fourth quarter they need to make a big switchover to the new product line anyway, so they can actually use the “idle time” profitably.

    • Sacto_Joe

      I might add that I see this ending when they can finally produce enough to match demand in the first quarter of new iPhone sales. But I have absolutely no idea when that will happen!

    • http://www.asymco.com Horace Dediu

      It has everything to do with the sales channel and almost nothing to do with anything else.
      Sent from my iPad

    • http://www.asymco.com Horace Dediu

      It has everything to do with the sales channel and almost nothing to do with anything else.
      Sent from my iPad

      • neutrino23

        Could you expand on that sometime? This is something I’ve often wondered deeply about. Why do they set their prices at the level they do? Why not $50 less? Why not $100 less? They don’t seem to be really interested in the cash itself. It’s almost like it’s annoying having all that money pile up. It seems as if the price is a feature. As if selling such a beautiful object for less than they do would be unseemly.

      • El Aura

        I think what Horace might mean is if they reduced the iPhone price by $100, the carriers in the US would still sell it at the same price point and just reduce their subsidy. They already sell the top Android phones at the same subsidised price as the iPhone, ie, they charge what the market can bear. Because so many iPhones are sold via the carriers, they set the final price most customers see, thus Apple keeping the iPhone price high is too a large degree just milking the carriers.

    • http://twitter.com/WalterMilliken Walter Milliken

      The price increases in some places may reflect increased costs in the iPhone 5 design — both the CPU and the screen are very new technologies which Apple presumably has invested money in, and cutting-edge parts are always a lot more expensive than more mature ones, usually due to yield issues.

      Which isn’t to say Apple isn’t making a lot of money. I don’t know what their margin target is based on — part of it may be defensive, since they *do* preorder a lot of components, and invest heavily in production tooling; if demand fell off they could be on a *very* big hook, a bit like a grocery store with pricing on perishables. Sometimes it seems to me like Apple has a bit of a Depression-era mentality….

      The other question here is how much they’d have to lower prices to gain share, when partly they’re competing against under-$200 “smartphones” from no-name manufacturers in China. From what I’ve seen of the Samsung Galaxy numbers, it doesn’t look like most of that Android market share is actually high-end devices. And the web usage numbers seem to imply that most of those “smartphones” aren’t being used very much as such.

      A final point — I think Apple may be looking at the relative stability of user populations between Android and iOS and simply waiting the market out. It looks like there’s going to be a fairly sizable population shift from Android to iOS over time, though I don’t necessarily think it will reverse their market share positions. This is an approach Apple seems to have used in the PC market, and they see their Mac market share grow slowly but steadily over time. Grabbing market share by price-cutting may be a common Business 101 strategy, but Apple just doesn’t seem to go there, and it’s not clear they see any need to — their current strategy is winning on everything but raw market share.

  • ralphel

    Top-but-one y-axis label on the 2012 chart should be “iPhone 4S 16Gb”?

  • http://twitter.com/WalterMilliken Walter Milliken

    Horace, in the “Late 2012″ chart, I think the second label down on the left is supposed to be iPhone 4S 16GB.

  • oases

    And isn’t the 8GB 4 more widely available than the 8GB 3GS?

    • KirkBurgess

      Do you mean that it’s available on Verizon?

      • Joe_Winfield_IL

        It’s available on CDMA carriers, not exclusively Verizon. The 3GS was GSM-only.

      • KirkBurgess

        I’m wondering what the I placating of wider distribution of the iPhone 4 is? Is a possible implication a lower ASP?

        Although I’m wondering how much an mpact it could have, how many CDMA carriers are there besides Verizon & Sprint?

        On a similar note, it’s possible the iPhone 4 is simply a far more attractive device than the 3GS – which could lead to a higher mix of the entry level device.

      • http://twitter.com/WalterMilliken Walter Milliken

        I believe China Telecom (#3 in China) is CDMA, and there are assorted smaller carriers worldwide who use CDMA (I recall some in India and Japan). So the availability of a low-end CDMA iPhone is not insignificant…

  • Noah Berlove

    Here in Canada, Apple has raised the price of the iPhone. When the 4S launched last year the 16GB version was $649 (unlocked from Apple). The 16GB iPhone5 is $699. This difference is not reflected in the changes in the exchange rate unless Apple is hedging.

  • http://www.facebook.com/profile.php?id=100000728233984 Kristian Iskanius

    We have to remember the currency issues. Dollar vs. Euro etc.

  • http://www.facebook.com/profile.php?id=100000728233984 Kristian Iskanius

    We have to remember the currency issues. Dollar vs. Euro etc.

  • Joe_Winfield_IL

    Horace, did you hear that the new Lightning dock protocol does not support video-out? Apple is responding to customer questions about video-out with marketing speak about Airplay. I’m curious to see whether this drives further sales of the Apple TV…even though it’s just a hobby.

    • http://twitter.com/WalterMilliken Walter Milliken

      I doubt there will be much effect, myself. And Apple has apparently officially told the Verge that Lightning-to-video-out adapters will become available soon.

      Personally, I suspect the Lightning port is a sleeper feature; I’m betting that it’s a new serial bus protocol similar to PCIe, Thunderbolt, and FireWire. Various rumors are surfacing on tech blogs of things it will enable, including the iPhone as a general USB master (as opposed to slave) device, HDMI and VGA video out, as well as the announced audio/30-pin USB Dock connector. My guess is that all these are active adapters, with embedded chips providing the translation from the Lightning protocol to the legacy function.

      My own bet is that Lightning is actually some kind of cut-down PCIe or Thunderbolt interface especially suited to lower-power, lower-speed operation. I wouldn’t bet against it being able to talk “directly” (via active adapter cable) to Thunderbolt ports at some point at high speed, and/or USB 3.0.

      This kind of design just makes engineering sense, fits in with some of the design directions I’ve seen in Apple products over the years, and would enable the iOS devices to become true computer replacements, with their own set of standardized 3rd-party plug-in hardware for specialized applications. (One issue here would be device drivers, which don’t fit neatly into Apple’s sandboxed iOS model — a problem that has affected Bluetooth and USB device interfaces to older iOS devices, I understand.)

      If the interface is PCIe-based, then a *huge* ecosystem of add-on devices could be easily developed using existing, or slightly-modified PCIe protocol cores. And that would be *way* beyond anything that the current USB-2.0-based model of current Android phones can do. But right now, it’s just being the “new Dock” replacement….

    • http://twitter.com/WalterMilliken Walter Milliken

      I doubt there will be much effect, myself. And Apple has apparently officially told the Verge that Lightning-to-video-out adapters will become available soon.

      Personally, I suspect the Lightning port is a sleeper feature; I’m betting that it’s a new serial bus protocol similar to PCIe, Thunderbolt, and FireWire. Various rumors are surfacing on tech blogs of things it will enable, including the iPhone as a general USB master (as opposed to slave) device, HDMI and VGA video out, as well as the announced audio/30-pin USB Dock connector. My guess is that all these are active adapters, with embedded chips providing the translation from the Lightning protocol to the legacy function.

      My own bet is that Lightning is actually some kind of cut-down PCIe or Thunderbolt interface especially suited to lower-power, lower-speed operation. I wouldn’t bet against it being able to talk “directly” (via active adapter cable) to Thunderbolt ports at some point at high speed, and/or USB 3.0.

      This kind of design just makes engineering sense, fits in with some of the design directions I’ve seen in Apple products over the years, and would enable the iOS devices to become true computer replacements, with their own set of standardized 3rd-party plug-in hardware for specialized applications. (One issue here would be device drivers, which don’t fit neatly into Apple’s sandboxed iOS model — a problem that has affected Bluetooth and USB device interfaces to older iOS devices, I understand.)

      If the interface is PCIe-based, then a *huge* ecosystem of add-on devices could be easily developed using existing, or slightly-modified PCIe protocol cores. And that would be *way* beyond anything that the current USB-2.0-based model of current Android phones can do. But right now, it’s just being the “new Dock” replacement….

    • http://twitter.com/WalterMilliken Walter Milliken

      I doubt there will be much effect, myself. And Apple has apparently officially told the Verge that Lightning-to-video-out adapters will become available soon.

      Personally, I suspect the Lightning port is a sleeper feature; I’m betting that it’s a new serial bus protocol similar to PCIe, Thunderbolt, and FireWire. Various rumors are surfacing on tech blogs of things it will enable, including the iPhone as a general USB master (as opposed to slave) device, HDMI and VGA video out, as well as the announced audio/30-pin USB Dock connector. My guess is that all these are active adapters, with embedded chips providing the translation from the Lightning protocol to the legacy function.

      My own bet is that Lightning is actually some kind of cut-down PCIe or Thunderbolt interface especially suited to lower-power, lower-speed operation. I wouldn’t bet against it being able to talk “directly” (via active adapter cable) to Thunderbolt ports at some point at high speed, and/or USB 3.0.

      This kind of design just makes engineering sense, fits in with some of the design directions I’ve seen in Apple products over the years, and would enable the iOS devices to become true computer replacements, with their own set of standardized 3rd-party plug-in hardware for specialized applications. (One issue here would be device drivers, which don’t fit neatly into Apple’s sandboxed iOS model — a problem that has affected Bluetooth and USB device interfaces to older iOS devices, I understand.)

      If the interface is PCIe-based, then a *huge* ecosystem of add-on devices could be easily developed using existing, or slightly-modified PCIe protocol cores. And that would be *way* beyond anything that the current USB-2.0-based model of current Android phones can do. But right now, it’s just being the “new Dock” replacement….

    • http://www.asymco.com Horace Dediu

      The video out feature was very difficult to use. It assumed you put your phone next to the TV and that defeats its purpose as a mobile device requiring you to move to use it.

  • http://twitter.com/MrWilliamChang William Chang

    Horace, this analysis is in terms of revenue. Is there analysis that you can do in terms of average profit per unit? A number of people have put forth the idea that Apple sells older models of iPhones because they can do so at minimal manufacturing cost because it is based upon an existing production line. It would be interesting to see some numbers to put into perspective how successful this strategy is.

  • http://twitter.com/MrWilliamChang William Chang

    Maybe I’m wrong, but aren’t most iPhones sold with plans (ie not unlocked)? If that is the case, looking at the average revenue per product provides the clearest view into Apple’s pricing strategy. In the US with a plan, the iPhone prices are $199 for the 5, $99 for the 4S, and $0 for the 4. If this is the price that typical consumers see, aren’t the prices of unlocked phone irrelevant?

    • KirkBurgess

      It’s very relevant outside the US market (the majority of apples sales), where the unlocked price is much more visible to the consumer.

      On most carriers the iPhone is available on a variety of different priced monthly plans, with the upfront handset cost ranging from $0 up to the full unlocked price of the phone.

      • El Aura

        This is from Swisscom: http://imageshack.us/a/img42/1828/oneeh.png and this is from T-Mobile (Germany): http://imageshack.us/a/img152/9623/twoj.png as you can see you can get the 4S at Swisscom (these are still pre-iPhone-5-release prices) from CHF 1 with the no-contract price clearly spelt out. And at T-Mobile you can get the iPhone 5 for a price range from 1 Euro to 350 Euro (on contract). This price diversity is pretty much standard in Europe.

    • http://twitter.com/WalterMilliken Walter Milliken

      And the entry-level price of an unlocked smartphone is going to be a key issue in many parts of the world where typical users buy pre-paid SIMs to get their phone service.

      At some point, I think smartphones will completely bypass traditional PC sales in those regions, just like cellular telephones have completely bypassed wireline phone deployment. The job-to-be-done will become “device which is both my computing device and communications device”, since a computing device without communications is not very useful these days.

      We’re already beginning to see signs of this shift with iPads cannibalizing PC sales in the US (“post-PC computing”), but I think there will be parts of the world where smartphones may be good enough (and a bit cheaper) for ordinary computing needs. Key drivers will be low price, adequate network connectivity, and availability of cheap, useful apps.

      I can’t see that Apple would be unaware of this potential, but it doesn’t need to address it *yet*, and it may not be worth their time if the price sensitivity turns out to be stronger than the importance of ease-of-use or longer-term costs (fragility, reliability, etc.)

  • Hans Christian

    Combining this post with the newer one, doesn’t this graph demonstrate the new iPad is better than what the buys want? It’s not a dramatic statement, but a signal nonetheless, no?

    • http://www.asymco.com Horace Dediu

      It may. If the average selling price continues to drop it would indicate that iPad 2 is good enough. It would also suggest the reasoning behind an iPad mini (a new basis of competition: smaller rather than more performance). This is the pattern that can be observed for the iPod. After a few years of improvement in one dimension (capacity) the product branched into new form factors and new bases of performance.

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