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Will a price hike for the new iPhone backfire?

Word on the street is that Apple is approaching carriers with the idea of raising next-gen iPhone’s price by $100, but apparently they’re not willing to embrace it with open arms.

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The base iPhone model in the US costs $200 with a conventional two year service contract. Carriers subsidize the price for their subscribers, who pay it back in monthly installments added to their phone bill. With the iPhone already under pressure from competitively priced rival, would raising the price be the right thing to do?

Peter Misek, analyst at Jefferies, believes so. In a note to investors today, Misek says that since there are no other “gaming-changing” phones expected to be released this year Apple just might be able to get away with bumping up the price since the iPhone line has a massive fan following. It has the sort of customers, even if a small subset, who wouldn’t mind a price hike as long as they get a new iPhone. Carriers obviously won’t pass up on the opportunity to sell it.¬†Misek says that since it is going to be the only “head-line worthy” high-end smartphone launching in fall, carriers wouldn’t dump it even if Apple raises the price.

Rumor has it that the additional $100 Apple wants to charge for the new iPhones would have to be equally split between subscribers and carriers. So if the latter covers $50, this raises the monthly payment on top of the phone bill. Subscribers would then have to pay $250 upfront, meaning that they need to put more money down while still having to stick with a two year service contract. In the U.S., companies have charged as much as $299 upfront for their latest and greatest devices, so Apple may not have anything to fear as far as its home turf is concerned.

The move can backfire in markets where carrier subsidies aren’t as good as they are in the U.S., or where they don’t exist at all. If the price of a factory unlocked unit goes up by $100 that puts the new iPhones at a disadvantage, putting it even further away from the reach of most customers in emerging markets. Android OEMs have already been giving Apple a hard time in these markets with their competitively priced handsets, and ultimately they might be the ones reaping the rewards of what Apple aims to sow.

Source: CNET

Adrian Fonseca
Adrian Fonseca keeps a close eye on all Apple news, rumors, leaks and developments. In his spare time, he likes to read books.

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