Picked up by AppleInsider, a new report from JP Morgan reveals Apple has managed to cut the cost of building the iPhone 11 compared to the iPhone XS by up to 12%. But users are unlikely to reap the benefit of this.
JP Morgan says the bill of materials for the iPhone 11 has been reduced by between $30 and $50 and with the bill of materials for Apple’s flagship iPhone XS Max priced at only $433 that’s a lot (7-12%). JP Morgan pegs a lot of this on a reduction in memory prices, but Apple has also cancelled a major iPhone XS feature this year which will undoubtedly help iPhone 11 prices.
So why won’t users enjoy the savings as well? It’s political. JP Morgan says that Apple will use the reduced costs to absorb the threat of 10% tariffs being placed on Chinese electronics (the vast majority of iPhones are made in China) in the ongoing trade war between China and the United States. That said, even then Apple may not play fair.
JP Morgan notes that 10% tariffs would have an 8% earnings impact if Apple absorbed the tariffs but two-thirds of iPhones are sold outside the US and no price cuts are planned for other regions “meaning Apple will still overall benefit from the reduced production cost.” Apple is also not expected to cut US prices, even if the 10% tariffs fail to materialise.
How much this annoys you will depend on where you live, your politics and your loyalty to Apple.
Perhaps the bigger question, however, is whether the iPhone 11 will actually do enough to justify retaining the same price point as its predecessor. Recent leaks have revealed the big news Apple hoped to keep quiet and it certainly boosts the appeal of the range, but the new models are still objectively ugly while the strange new branding is likely to confuse users about what they’re buying.
Moreover, we already know a lot about Apple’s ambitious 2020 iPhones and, if news spreads of their new design, size changes, ProMotion displays, USB-C ports, 3D cameras and universal 5G it will deter a lot of upgraders.
It’s a big call, Apple.
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