Two trends in iPhones might seem to place the interests of Apple and its customers on opposite sides of the fence. Making iPhones more expensive seems good for Apple, bad for customers. Conversely, making iPhones last longer would seem good for customers, bad for Apple.
But all is not necessarily as it seems, argues one of the smarter Apple analysts …
Horace Dediu said he was surprised there wasn’t more market reaction to something Apple VP Lisa Jackson said during the iPhone presentation.
But Dediu argues that the move makes long-term commercial sense for Apple.
At this point in the presentation I wondered if everyone would rush out of the room and call their broker to sell Apple shares. One premise of investing in durable goods hardware companies is that value depends on frequency of upgrades. If products are not replaced frequently they do not generate revenues and the company selling them ends up growing very slowly if at all after markets saturate. The smartphone business is certainly approaching saturation and the implication of making Apple products more durable would imply lower revenues from replacements.
The more customers Apple has, the greater its services revenue; its opportunity for cross-selling; and its market for accessories.
That last part may not have mattered much when a typical iPhone accessory was a case, but if you think about today’s iPhone accessories, Dediu’s argument makes a great deal of sense. Every iPhone user is a potential customer for, among other things, an Apple Watch, AirPods and a HomePod.
Dediu also suggests that higher iPhone prices may not necessarily be bad news for customers.
That one is perhaps more of a stretch in terms of the scale he suggests, but it’s fair to say that phones which last longer and offer greater usability do deliver better value than previous generations. Whether that justifies the kind of increase we’ve seen in terms of average selling price is a trickier question.
