Apple will announce the next iPhone later this month, and rumours are running rampant about the high cost of the next phone.
The next phone is rumoured to have a bezel-less screen, no home button, a dual-lens, 3D capable back camera system and more memory than previous generations of the iPhone. All this new tech is expected to drive a “supercycle” of upgrades to the next model, but it also means the price of the iPhone might jump higher.
According to a recent survey from UBS, current iPhone owners would be willing to pay as much as $US115 more than their last iPhone to upgrade to the new model. The survey also found that Apple customers are more willing than buyers of Samsung or other Android devices to pay more to upgrade their phones.
Some rumours price the next iPhone at $US1,000, which UBS thinks would drive away a lot of Apple’s potential customers. At $US975, only 35% of those who were previously surveyed to be “very likely” to purchase the next iPhone would actually do so.
The expected price increase of the next iPhone is largely out of Apple’s hands. The components needed for the new technology is more expensive than the tech in previous phones, according to UBS. The OLED screen is about $US24 more expensive, the dual lens camera costs about $US19 more, and the new 3D sensing technology adds about $US10.50 to the cost of the phone.
The total increase in the price of components for Apple is estimated to be around $US80, according to UBS. If Apple is to keep similar margins as its previous phone, UBS is estimating the new phone would cost $US900, much more than the $US769 of the previous model.
Apple could lower its margins on the next iPhone to keep prices for consumers low, but that would mean cutting into one of the company’s biggest cash cows, which UBS doesn’t expect.
UBS points out that the rising cost of components will affect the entire smartphone industry, not just Apple. Samsung increased the price of the Galaxy S8 by about $US70 and has seen lower than expected shipments thus far.
UBS rates Apple a buy with a price target of $US180. Apple is currently trading for $US161.62 and is up 39.32% this year.