Apple unveiled its new iPhone range, with the iPhone Xs, iPhone Xs Max and iPhone XR. The iPhone Xs is a direct replacement of the iPhone X, whereas the iPhone Xs Max sports a larger screen. The exception in Apple’s lineup is that of the iPhone XR, which marks a departure from Apple's usual product strategy.
Low-cost iPhone is still not a cheap phone
Apple previously tried offering low cost models with its iPhone SE and iPhone 5C, but with limited success. The downgrade in specifications to achieve a lower price-point was not attractive enough for consumers to want to buy them and instead, confused consumers in terms of the brand’s overall positioning. Through that experience, iPhone XR now shares the same family look and carries similar specifications as its pricier siblings. Apple does not (and should not) compete in the low-cost segment and the iPhone XR’s price (US$749) reflects this approach. At this pricing, iPhone XR offers an alternative for Apple fans who may not be keen to pay for the iPhone Xs and also helps to protect the premium pricing of its pricier siblings.
Premium market is a bloodbath
On the competitive landscape, Huawei has been gaining market shares at the expense of Apple and Samsung globally and is now ranked third (12%) in global smartphone sales, behind Samsung (20%) and Apple (14%) in 2018. Apple appears to be losing its luster with the Chinese consumers, with sales projected to drop 6% in 2018 as Chinese smartphone brands like Huawei, Vivo and Xiaomi are seen to be frontrunners in innovations, rather than being a fast follower of Samsung and Apple. As a consequence, the premium smartphone market is increasingly saturated, as manufacturers started to pile on features on mid-tier models in bid to grow volumes, blurring the line between flagship and mid-tier offerings. The new iPhone models will be especially crucial for Apple to consolidate its market leadership position and especially in the US market (34%) where Huawei has been unable to gain a foothold, due to security concerns by the American government.
The lure of Apple still apparent
Despite recent shakes to its market shares, Apple still enjoys a large and loyal following, who are enticed and tied down to the Apple’s ecosystem. Apple has looked to further entrench its users with Apple Pay, Apple Music and through timely updates of software; like iOS12 which will be available on September 17 2018. In contrast, Android’s latest Oreo, which was available since August 2017, only had 15% share.
In the face of rising competition, sales of iPhones is projected to decline 1% in 2018 in volume terms but the increase in selling price for the iPhone Xs and iPhone Xs Max models will drive Apple’s revenue. The availability of a lower priced model in the form of iPhone XR offers an economical alternative to Apple fans who may not be willing to pay close to a thousand dollars for the iPhone Xs series and work collectively to attract and retain a wider consumer base. More critically, these new models will also help generate additional revenues from related services, which saw a massive 31% growth to US$9.2 billion in the last quarter, compared to the same quarter last year.
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