Author of the article: Customers shop at Apple Inc. store. Fifth Avenue in Manhattan, New York. File photo Andrew Kelly/Reuters
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The latest iPhone hits stores on Friday, and Apple Inc. is counting on well-intentioned buyers to make the device a success during a year of high inflation and volatile tech spending.
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The iPhone 14 series retains the best features for the high-end Pro models that cost at least US$1,000. And based on pre-order data, the strategy is already working with consumers, who have turned the pricier new iPhone into the most popular version.
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Although overall mobile and PC spending is slowing this year, there’s still an appetite for top-of-the-line smartphones — Apple’s forte. This has allowed the company to keep production steady at a time when much of the industry is scaling back plans. “Data continues to point to strong demand for the iPhone 14 Pro and Pro Max, which could have a materially positive impact on both mix and margins,” Evercore ISI analyst Amit Daryanani said in a exhibition this week.
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The iPhone 14 series was revealed earlier this month along with the new Apple Watches and AirPods. The company did not raise prices, a surprise to analysts who thought inflationary pressure would force the move. But Apple is still trying to increase sales to consumers more than ever. The standard iPhone, which starts at $799, doesn’t even run Apple’s latest processor, the A16. Instead, it uses the same A15 chip as last year, with the A16 coming to the Pro models. The Pro phones also have significant camera improvements and a new interface called Dynamic Island. That leaves users with fewer reasons to upgrade to a basic iPhone 14, but plenty of incentive to pay a bit more for the Pro. A flurry of carrier promotions and offers can also entice consumers to buy a flashier model.
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Apple revamped its display configurations this year as well. Gone is the mini version of the iPhone. Instead, the company is betting that consumers want more screen real estate. The non-Pro iPhone 14 will come in a 6.1-inch model and a 6.7-inch Plus version that won’t be available until October 7. Pre-order data suggests the iPhone 14 Pro Max is in higher demand than the same model last year, part of the upgrade shift, according to a report from KGI Securities. The question now is whether that momentum is strong enough for Apple to ride out a broader recession. Globally, the smartphone market is expected to decline 3.5 percent to 1.31 billion units this year, according to market research firm IDC. In China, a manufacturing hub for Apple and a key market, smartphone sales have fallen this year. However, Apple’s shipments are up five percent compared to an overall decline of 23 percent, according to Evercore ISI’s Daryanani.
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“Apple continues to gain significant share in China and we expect the gains to continue,” he said. A successful iPhone 14 launch could help ease investor concerns after a rollercoaster of a month. The stock has moved between gains and losses in recent sessions, with shares suffering their worst one-day decline since 2020 on Tuesday. A higher-than-expected inflation report and worries about rate hikes have hit tech stocks particularly hard. Apple shares are down 16 percent for the year, though that’s slightly better than the S&P 500, which is down 19 percent. The tech-heavy Nasdaq Composite is down 27%.
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Analysts expect Apple’s sales to rise six percent this quarter, a slowdown from the 29 percent gain it saw a year earlier — when pandemic-dependent consumers were still using technology. The iPhone 14 will be released a few weeks earlier in the year than usual, which is expected to help boost Apple’s revenue in the September quarter. The company’s biggest sales period of the year is usually the December quarter, due to holiday spending. Sales during this period are expected to increase by 3%, according to analysts’ estimates. The iPhone is unrivaled among Apple products in its importance. It provides about half of the company’s total revenue and helps boost sales of other devices, including the Apple Watch and AirPods. Both of these categories were revamped during the recent launch, further highlighting the company’s high-tech focus. The company unveiled an update to AirPods Pro and an early model Apple Watch Ultra, which – like the iPhone Pro – is designed to be bigger and better. And, of course, it will cost a little more. Bloomberg.com
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