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Why the iPhone X’s high prices might work out for you, even if you don’t buy one

By Alvin Soon - on 14 Sep 2017, 1:01am

Before September 2017, everybody had the same iPhone — whether you were rich or not, your iPhone was essentially the same as the everybody else’s.

That’s all changed now with the new iPhone X. Today, there are two kinds of iPhone; the iPhone ‘regular’ in two sizes, and an iPhone ‘premium’ that costs more than either of the two, at S$1,648 for the 64GB version and S$1,888 for the 256GB.

This isn’t the first time that Apple has split the iPhone line. Apple did it in 2015 with the iPhone 5C, and then in 2016 with the iPhone SE. But in both cases, Apple was reaching down; the 5C and SE were lower-priced iPhones compared to the year’s flagships.

The iPhone X is different, it’s punching up. This iPhone costs more, and it’s a groundbreaking new design with state-of-the-art features. It’s the first new design for the iPhone in three years, since 2014’s iPhone 6 and 6 Plus, and the first iPhone ever without the iconic Home button.

It’s also the first iPhone for other things; the first with a bezel-less screen, the first to ship with an OLED display that supports HDR, the first to come with Face ID, the first to have two optically stabilized rear cameras.

But besides charging more for these choice features, there may be other reasons for the iPhone X’s higher prices. As John Gruber astutely argued, the iPhone X might simply contain new custom parts and premium materials that are difficult to manufacture at the scale that a new iPhone demands.

For example, rumors are that Samsung Display, which makes the OLED screens in the new iPhone Xs, is charging Apple a premium for the parts, since Samsung Display is the one and only company that can produce phone-sized OLED displays at the scale and quality that Apple needs.

Apple sold 45.51 million iPhones in last year’s holiday quarter, following the release of 2016’s iPhone 7 and 7 Plus. That’s the kind of scale that Apple needs to deliver in one quarter alone. If Apple constrains the kinds of technologies they can place into a new iPhone by the constraints of what can be mass-produced, they risk being disrupted by smaller competitors who don’t need to meet the same numbers.

People will gripe about the higher prices on the new iPhone X, but it’s not the only tech company that’s raised its prices. At S$1,398, the new Samsung Galaxy Note8 is also more expensive than its S$1,168 predecessor, and this could mean that rising prices for flagship smartphones are the new normal.

While this will hurt consumers in the short term, there’s a positive way this might turn out in the long run. By forcing its suppliers to operate at larger quantities, these companies may be able to deliver new technologies at high volume in the near future.

This has also happened before. Back when the original iPhone was still being developed, Steve Jobs placed a large order for Gorilla Glass with Corning, to be delivered in six months. There was just one problem — Corning wasn’t ready to manufacture it at that scale.

Corning CEO Wendell Weeks tried to tell Jobs it couldn’t be done, but Jobs persuaded him into it. Six months later, Corning delivered, and Gorilla Glass is now used in multiple smartphones worldwide.

It’s unclear whether the ‘regular’ iPhones will get a facelift next year that’s similar to the iPhone X. But if producing the iPhone X at scale helps bring down costs and increase manufacturing capacity, we might be able to see the new features, like OLED screens and Face ID, on the iPhones next year. That would be a win for every iPhone owner, even if we don’t buy the new iPhone X.

Alvin Soon

Alvin Soon / Former Deputy Editor

I like coffee and cameras, but not together.