Will 5G blow up iPhone 12 pricing?
Rumor has it, Apple will be releasing not three new iPhones like last year, not even four new iPhones, but a whopping 5 new iPhones in 2020. Sure, it's nothing compared to the 879 new phones Samsung will likely release this year, but for Apple, it's a lot. Like… a lot a lot.
When Steve Jobs announced the original iPhone, it was just that, the original iPhone. There were variations in storage size but not in the original iPhone. It was literally meant to be one iPhone for everyone.
Except for the price. It started at $499 for 4GB.
Now, 13 years later, rumor has it we'll be getting upwards of 5 new iPhone and at the widest price ranges ever.
- iPhone 9 at $399 for people who want a less expensive iPhone that still has a Home button.
- iPhone 12 "mini", for $649 or $699 people who want a smaller but still modern iPhone.
- iPhone 12 for $699 or $749 for people who just want the new iPhone.
- iPhone 12 Pro for $999 or maybe even $1099 if 5G blows up the pricing, for people who just want the new iPhone with all the new bells and whistles.
- iPhone 12 Pro Max for $1099 or maybe even $1199, because of 5G, for people who just want the new iPhone with all the new bells and whistles and the biggest display and battery possible.
iPhone Pricing Progression
So, how did we get here? I'm going to ignore storage tiers for this just to keep it simple, but that original $499 iPhone was cost-corrected quickly, first by price-dropping the original from to $499 for 8GB, and making a deal with AT&T to subsidize the second-generation iPhone 3G down to $199 for 8GB. Full price went to $599, though, but few people ever saw or sought that.
Then, when Apple introduced the third-generation iPhone 3GS, it kept the same $199 subsidized and $599 unsubsidized price, this time for 16GB, but did something else interesting — it decided to address a more entry-level market for the first time as well. Not by introducing a less expensive model but by keeping the previous iPhone 3G on sale for $99 subsidized, $499 unsubsidized.
There was still only one new iPhone a year, though Apple added color options — black and white — but Apple had added a pricing option as well.
When the fourth-generation iPhone 4 rolled around, Apple was facing a world where almost everyone in the U.S. who wanted an iPhone and was willing to stay or switch to AT&T to get it… had gotten it, and to continue to grow, Apple had to add additional carriers.
So, about 7 months later, the first Verizon iPhone 4 launched. Everything stayed pretty much the same through the 5th generation iPhone 4s, though now with both GSM for AT&T and international, and CDMA for Verizon and eventually Sprint, models. While the subsidized price stayed at $199 for 16GB, the unsubsidized price increased to $649.
But, with each new model, Apple kept keeping around the previous model for $100 less. Until the 7th generation iPhone 5s.
Whether the iPhone 5 and its chamfered edges was just too expensive to produce at a discount, Apple wasn't certain 64-bit and Touch ID or even the first gold finish were enough differentiation, the smartphone and iPhone markets were maturing and the company simply wanted to test a different strategy, or… yes, when the iPhone 5s was introduced, the iPhone 5 was discontinued, and the iPhone 5c was launched not as a price drop but as a new less-expensive iPhone in its place.
Instead of another glass and metal premium blockbuster like the iPhone 5s, one that debuted in the fall, spiked over the holidays, and then declined until the next fall saw the next blockbuster, with the iPhone 5c Apple tried something more unabashedly plastic in fun pop art colors, meant to be more like a TV show, that sat on the shelf and sold for an entire season.
Unfortunately, the iPhone 5c was new in candy coating only. The processor and camera were still the previous year's, and while the colors popped, the sales did not.
Still, it was the first time Apple expanded to making two new iPhones at a time. And that's what companies do over time. They segment. They try to find a large enough group of potential customers that aren't buying or paying as much as they might and they try to make a product that's more appealing to that group. It's why there are so many different kinds of cars and TVs. It why Apple eventually made four different kinds of iPods and a half-dozen different kinds of Macs.
And it's why the next year, with the 8th generation iPhone 6, Apple did it again. This time not with plastic and metal, less expensive and premium, but with double metal and premium, and something else new - big and bigger.
See, Android phones had been swelling for years. Apple had gotten a little bigger with the iPhone 5 but nothing compared to the Android behemoths of the time. And what's better than owning almost all the profit in the premium market for 4-inch phones and under? Owning almost all the profit in the premium market for phones 4-inches and over as well.
And, it also allowed Apple to introduce a third price point, instead of $100 less expensive, this time it was $100 more. $299 subsidized for 16GB, $749 unsubsidized.
That done, Apple turned its attention back to the less expensive market. But, instead of making a plastic iPhone 6c to sit beneath the upcoming iPhone 6s, instead of just making a less expensive iPhone, Apple decided to kill two markets with one product.
See, some people, some very premium people, didn't like the big and bigger iPhones. They still wanted a smaller iPhone. But not one like the 5c. Not one with previous generations specs that compromised on performance and camera. One with the latest specs and all the performance and camera.
So, Apple went back to the iPhone 5 platform and made the iPhone SE. And it had almost all the latest features, but the smaller size many still loved. What's more, because the iPhone 5 platform had been all paid down, Apple could still offer the iPhone SE for less. $399 for 16GB.
It satisfied both the less expensive and the smaller iPhone markets. And even Apple underestimated the demand for it.
What's more, when you added the iPhone SE to the 10th generation iPhone 7 and iPhone 7 Plus, even with the former staggered six months before the two latters, Apple proved it could produce three new iPhones in a year.
The iPhone 7 remained at $649 but now for 32GB of storage, but the iPhone 7 Plus with its extra camera, went up an extra $20 to $769. It remained a bestseller, though, showing there was a higher-end market for higher-end features.
All of those things would come into play the very next year, when Apple not only announced three new iPhone models all at the same time, but an all-new model on top of all of them.
The 11th-generation iPhone 8 and iPhone 8 Plus were joined by the 12th generation iPhone X. And, not only did the iPhone 8 jump $50 to $699 for 64GB, and the iPhone 8 Plus, $30 to $799, the iPhone X dropped at a whopping $999.
Apple thought that if it brought new technologies forward, even if it cost more to make and sell, there'd be a market for it even over the existing premium models.
And, despite a lot of doomsaying, they were right.
So, the next year they amped it up even more. Instead of two traditional flagships and a higher-end model, Apple went for two higher-end models: the iPhone XS and the new iPhone XS Max for $1099.
Then, Apple did a partial iPhone 5c play and slid a new, less expensive model underneath it. The iPhone XR for $749 for 64GB. It was colorful, but it wasn't compromised like the 5c was. The XR had the latest processor and main camera.
But, there was an optics problem. Where the iPhone X was seen as an extra, above and beyond, the XS was seen as just the next iPhone. And at $999, it was also seen as out-of-touch expensive. Even the iPhone XR, which was seen as less expensive, was $50 more than the iPhone 8 had been.
And, that created a lot of negative press and sentiment. Especially during a time when the overall smartphone market was reaching saturation and China especially was struggling.
So, last year, Apple switched gears again. Still three new iPhones, still at the same time, but this time, they gave the iPhone 11 no modifier name to the base model, and carefully rebranded the higher end models to iPhone 11 Pro and iPhone 11 Pro Max.
What's more, Apple brought that base model pricing back down to $699 for 64GB and $749 for 128GB.
And, because perception is everything, the market proved much, much happier. Especially after the highest-profile competition, Google and Samsung, came in more expensive for the Pixel 4 and Galaxy S20.
iPhone 12 pricing in the age of 5G
This year, it sounds like Apple is going to repeat some form of all its previous playbooks, but with some new twists.
First, in the spring, a next-generation iPhone SE, maybe called the iPhone 9, that instead of being less expensive and smaller will be less expensive and still have a Home button. An iPhone 8 body with, hopefully, iPhone 11 brains. And hopefully once again at $399.
Then, two regular priced iPhones. The iPhones 12. One the same size as the iPhone XR and iPhone 11, and the other slightly smaller, again meant to appeal to people for whom current iPhones are just too physically big.
Basically, a way to satisfy the other half of the iPhone SE market, the small but premium market. Maybe at the same $699, but hopefully even for a little less, like $549. We'll have to wait and see where Apple thinks the "make it up in volume" pricing really is.
Taken together, the iPhone 9 and smaller iPhone 12 provide a pretty compelling, fairly complete answer to people who want smaller iPhones, but with the traditional Home button but also with the new, modern design.
At the top end, the iPhone 12 Pro moves to the same size as the iPhone XR and 11 as well, but the iPhone 12 Pro Max gets even bigger. Part of that will be to support the extra power and battery needed for mmWave 5G, see my previous video. But it might also let Apple explore even higher ends again, and display sizes for people who use their iPhone as their primary computer and literally want the biggest screen on it possible. Like a tiny tablet, yes please.
Could still be $999 and $1099, or the 5G and size could bump them up to $1049 and $1149 or even $1099 and $1199 respectively.
Either way, that's an incredible spread of new iPhone models and price points. Sure, it'll take launching one new iPhone in the spring and an unprecedented four new iPhones in the fall, but it's something Apple has been preparing for for the better part of the last decade.
And, again, this is what happens in a mature market. It's what happened with the iPod, the Mac, even the iPad. Apple is starting to be able to do it at iPhone scale, which is pretty much the biggest scale imaginable. Again, if the rumors are true and if Apple has gotten its market segmentation and demand forecasting right.
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Rene Ritchie is one of the most respected Apple analysts in the business, reaching a combined audience of over 40 million readers a month. His YouTube channel, Vector, has over 90 thousand subscribers and 14 million views and his podcasts, including Debug, have been downloaded over 20 million times. He also regularly co-hosts MacBreak Weekly for the TWiT network and co-hosted CES Live! and Talk Mobile. Based in Montreal, Rene is a former director of product marketing, web developer, and graphic designer. He's authored several books and appeared on numerous television and radio segments to discuss Apple and the technology industry. When not working, he likes to cook, grapple, and spend time with his friends and family.