iPhone 8 concept
The concept image of iPhone 8

Apple Inc. (NASDAQ:AAPL) has been dominating the news in tech circles for a few months now for a variety of reasons. They recently become the first US company to have a $800 billion market cap amid much fanfare. Despite this monumental achievement, the focus remains squarely on the upcoming tenth anniversary iPhone. Perhaps, the most hyped smartphone ever, the fever pitch surrounding the “iPhone 8” is intensifying every day. A while back we took a look at the iPhone 8 and what we could expect from it. We also reported how the new iPhone could also be the most expensive iPhone at $1000+. Recent reports have emerged that now seem to confirm what many of us have suspected for a while now.

iPhone 8: The Most Expensive iPhone Ever

Recent reports from Business Insider have outlined the purported pricing for the 2018 iPhones:-

  • The iPhone 7S will start from $649, whereas
  • The iPhone 7S Plus will start from $769.
  • The iPhone 8 will start from $999.

Further, it is reported that the iPhone 8 will have two models – 128 GB and 256 GB. The 128 GB model will be priced at $999, whereas the 256 GB model will set buyers back a massive $1,099.  The reports also state that there will be no 32 GB or 64 GB models of the iPhone 8. Now if we factor in sales tax, even the base model of the iPhone 8 model will likely cost customers well over $1000.

So why is the new iPhone 8 likely to be so much more expensive than its 7S counterparts? Let’s have a look.

Justifying The Price Tag

A lot of the reasons behind the iPhone 8’s inflated price-tag has to do with the sheer amount of innovation Apple is cramming into the device. Analysts at Goldman Sachs are expecting new features such as a 5.8 inch OLED bezel-less display, 3D sensing, Faster memory, Biometric authentication, the new A11 processor and more.

This is how the new and upgraded features of the iPhone 8 will affect pricing, according to analysts from UBS:-

  • The upgraded camera will cost Apple $39 per unit, up from $36 in the iPhone 7 Plus.
  • The faster memory will cost $35 up from $25 for the iPhone 7 Plus.
  • The new Bezel-less OLED display will significantly add to the price, costing Apple $85 up from $60.
  • The upgraded mainboard will cost Apple $13 per unit, up from $7. The upgraded casing will also drive price up by $10.
  • The new 3D Touch or Force Touch module will drive up prices by $7 per unit for Apple.
  • Lastly, the all new 3D Sensing biometric authentication module will cost Apple $10 per unit.
  • Another factor driving up price is likely the absence of 32 GB or 64 GB models. This, however, makes sense from Apple’s perspective as the iPhone 8 will be marketed as a premium device with a premium price-tag.

Will Users Ever Buy a $999 Smartphone?

For all its innovation and new features, the question remains as to whether users will be willing to part with $999+ for a smartphone. Analysts at Credit Suisse seem to think so. They have awarded outperform rating to Apple stock because of growing optimism and hype around the upcoming iPhone 8 “super cycle“. However, not everyone is so convinced about this. Shira Ovide of Bloomberg Gladfy believes that Apple may not be able to do a repeat of the iPhone 6 super cycle as the US market and buying habits have changed. The extinction of carrier smartphone subsidies will likely make the $999 price tag too much to swallow. Since the US is such a key market for Apple, sales there will likely dictate the overall success of the iPhone 8.

The iPhone 8 will also be facing tough competition from the likes of a rejuvenated Samsung and Google. The standard has already been set with the critically acclaimed Samsung Galaxy S8. Additionally, the widely anticipated Google Pixel 2 is also likely to come out by the end of the year. With the Galaxy S8 priced quite a bit cheaper than the upcoming iPhone 8, Apple might find it difficult to convince consumers. The price-tag of $999 may also recuse Apple of the highly competitive and lucrative premium market in China which typically lies in the $400-500 range. This would be a pretty bad situation for Apple, as they are already losing valuable ground in the Chinese market.

However, Apple may look to offset the price a bit with included accessories. Some recent reports suggest that Apple may bundle in the AirPods with the iPhone 8. The inclusion AirPods which typically retail at $159 and are in huge demand would definitely win over some consumers. While the selling a smartphone for $999 may seem like a bad idea to many, if there is one company which can get away with it, it is Apple.

Takeaways

  • The iPhone 8 will likely be the most expensive iPhone ever with a price more than $1000. Marketed as a premium device, the phone will feature the latest and greatest that Apple has to offer.
  • A slew of innovative new features is likely driving up the cost of the iPhone 8. The biggest factor driving up cost is the all new edge-to-edge OLED panel.
  • The much hyped iPhone “supercycle” may not take place due to lack of carrier subsidies in the US. This would be highly damaging to Apple who has been suffering faltering iPhone 7 shipments. Their recently achieved $800 billion valuations will also come crashing down if the super cycle does not occur.
  • Apple faces tough competition from the Galaxy S8 and upcoming Google Pixel 2. The more competitive pricing of these models may lead to customers opting for them in lieu of the iPhone 8.