iPhone 11 ProSource: Apple

What you need to know

  • Ming-Chi Kuo has released a new note about 5G iPhone pricing.
  • The supply chain analyst believes that next year's iPhones will not see a major price increase.
  • Kuo believes Apple will offset increased production costs with changes to its supply chain cost reduction.

Apple is expected to ship anywhere up to six new iPhone models next year with the bulk of them being the first iPhones to feature 5G wireless technology. Reported by Macrumors, the expected new design as well as the inclusion of 5G should not cause a significant price increase according to supply chain analyst Ming-Chi Kuo.

5G components are projected to raise the production cost of the new iPhones by anywhere from $30 to $100, but in a note by TF International Securities, Kuo states that Apple intends to offset this additional cost by reducing its costs across the supply chain.

One possible area to see a reduction in investment is the company's potentially current practice of making an upfront, non-recurring engineering payment to suppliers who assisted in the redesigned metal chassis and frame for the upcoming 5G iPhones. This investment goes towards the "one-time cost to research, design, develop, and test a new product or component." Kuo believes that Apple intends to bring this, along with other areas of external research and development, in house.

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iPhone 12 concept A concept of the iPhone 12 by ConceptsiPhoneSource: ConceptsiPhone

While this could potentially spell problems for suppliers who rely on these contracts to survive slower sales months, Kuo predicts that it should not affect them too much. Apple is expected to begin releasing iPhones on a biannual basis, with low-cost iPhones in the spring and premium iPhones in the fall. This new release schedule would keep contracts coming throughout the year as opposed to one single payment.

Kuo has predicted that the new 5G iPhones will feature a new, redesigned metal frame that will appear similar to the iPhone 4. He believes that this new design will cost Apple significantly more to manufacture than recent models, spelling the possibility for an even more premium model of the iPhone.