Shulou(Shulou.com)11/24 Report--

According to news from Sept. 8, Beijing time, Apple has long been well versed in the art of up-selling. With global inflation high and the supply chain facing challenges, iPhone 14 could be Apple's biggest test to prevent consumers from downgrading their spending.

▲ iPhone 14 Series Mobile phones

At Wednesday's event, Apple also unveiled a number of new Apple Watch models and updated its long-awaited AirPod Pro headphones. These products will be the backbone of Apple's wearable device business, which currently has annual revenue of more than $40 billion.

However, iPhone is still the focus of the press conference. Apple still gets more than half of its revenue from smartphones, so it can't afford to get its signature product into the kind of predicament that haunts the rest of the smartphone industry. According to IDC, a well-known research firm, global smartphone shipments fell 10% in the first half of this year compared with the same period last year, and apple performed better than most companies. But as inflation rises and the economy slows, buyers of iPhone are likely to be more picky than ever, as they spend thousands of dollars.

Plus Pro series now, consumers have a lot of choices. Apple is now selling 26 different configurations for its newly released iPhone 14 series of phones, up from 16 five years ago. Prices for the iPhone 14 range from $420 to nearly $1600, and the most expensive ones are even more expensive than some of Apple's Mac computers.

Apple's solution is to leave more powerful features to the most popular models. The iPhone 14 series breaks Apple's long-standing pattern of equipping its latest phones with the latest self-developed chips, and only the iPhone 14 Pro model can use the latest A16 processor. The basic iPhone 14 will run on the A15 chip that Apple launched in the iPhone 13 series last year. Apple also added a large screen option to the basic version, introducing the iPhone 14 Plus, which effectively eliminated the Mini model of the previous two generations of phones. Canalys, a research firm, estimates that only 9 per cent of all iPhone 13 users choose the Mini model.

The average selling price of ▲ iPhone hit a new high.

For Apple, the introduction of the Plus model and the elimination of the Mini could increase the average price of the iPhone's overall product line by about 3 per cent. At the same time, dedicating the latest chips to the Pro series may add more sales momentum to this product line. Apple first introduced the Pro in 2019, equipped with a more powerful camera and a more advanced body design.

The Pro series has become popular among fruit fans. Since the launch of the iPhone 13 series last year, Pro models have accounted for 41 per cent of iPhone 13 series shipments, according to Canalys. By contrast, two years ago, the Pro accounted for 31 per cent of total iPhone 11 shipments.

The strategy of adding a storage space with a profit of up to 90% has helped Apple get more revenue from each phone sale. According to analysts' consensus expectations, Apple has sold 1.892 billion iPhone units in the three quarters since the launch of iPhone 13, according to data analysis platform Visible Alpha. IPhone's revenue over the same period was about $163 billion, and the average selling price was about $861, a record high and 12% higher than the average selling price in the 2019 fiscal year before the launch of the first Pro model.

The iPhone Pro may also help Apple implement its oldest upsell: storage space. The Pro's more powerful camera may prompt some buyers to opt for higher storage configurations. It is profitable for Apple for consumers to buy more expensive products.

Storage space price for ▲ iPhone 14 Pro

According to Apple's configuration design, the same model has multiple storage options, and the larger the capacity, the higher the price. Take iPhone 14 Pro as an example. Upgrading from 128GB to 256GB requires an increase of 900CNY, and upgrading from 128GB to the highest 1TB requires an increase of RMB4500.

Tony Sacconaghi, an analyst at Bernstein, an investment bank, estimates that Apple can earn a gross margin of 90 per cent on the difference in storage space for the same model. Apple's product gross margin reached nearly 37% in the first nine months of the fiscal year, the highest in a comparable period since the company began announcing product and service profit margins in 2018.

At this point, Apple's approach to avoiding the recession can boil down to getting more consumers to buy extra storage space.

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