Apple CEO Tim Cook won't raise iPhone 14 prices. He must first deal with a fierce rival — and it's not Samsung

Apple CEO Tim Cook won’t raise iPhone 14 prices. He must first deal with a fierce rival — and it’s not Samsung

Apple has something more important than Samsung’s 005930,
flip phone to worry about: Inflation.

None of the new iPhone 14 devices have increased prices relative to their iPhone 13 counterparts, Wednesday’s event showed, despite many analysts expecting the company to increase prices on high-end offerings.

When Apple AAPL,
introduced the iPhone 13 last September, inflation was high, but as consumers and investors check out the newly unveiled iPhone 14 lineup, they will do so while sweating through even higher inflation.

The iPhone 14 starts at $799, the iPhone 14 Pro starts at $999, and the iPhone 14 Pro Max starts at $1,099. Prices had been the real unknown ahead of Wednesday afternoon’s event.

Still, questions remain. Despite unchanged prices for the iPhone 14 lineup, it’s worth wondering how many people will have the money and the ability to spend on Apple’s latest range of smartphones, watches and headphones.

The issue of affordability has been put on a stark stage by a new Gallup poll released Wednesday asking how many people are getting burned out by the high cost of living and what they are doing about it.

A majority of Americans, 56%, now say that inflation is a serious or moderate financial hardship that threatens their ability to maintain their current standard of living, according to the survey. That’s an increase from 45% last November and 49% in January.

When Apple introduced the iPhone 13 last September, inflation data from the federal government showed a year-over-year increase of 5.4%. As of July, it is up 8.5% year-over-year, a lower-than-expected figure, helped by falling gasoline prices.

A majority of Americans, 56%, now say that inflation is a moderate or severe financial hardship that threatens their ability to maintain their current standard of living.

– Gallup Poll

While rising costs have long been hardest for low-income households earning less than $48,000 a year, Gallup said the biggest rise in self-reported hardship is coming from middle- and upper-income households.

They are people in households with annual income ranges from $48,000 to $89,999 and over $90,000, presumably core demographics for Apple’s latest gear. They, analysts say, are Apple’s AAPL,
main customers for its most expensive products.

From November 2021 to August 2022, there has been a 17 percentage point increase in middle-income households reporting financial hardship, and for high-income households, it has been a 12 percentage point increase.

Low-income households reported an increase of four points, but self-reported difficulties have been much more frequent, rising from 70% to 74%. They’re unlikely to spend hundreds of dollars on the latest iPhone, experts say.

Cutting back on spending or buying only the essentials are the best ways to beat inflation, Gallup said. A quarter (24%) said they are spending less, while second place was a tie between less vacationing and less driving, at 17%.

JP Morgan analysts said they expect “a broader rollout” of buy now, pay later plans and “increased focus” on how it can apply to people switching or upgrading their Apple technology.

Analysts had expected the standard iPhone model to remain at the existing base price of $799, but thought the price of other versions, such as the iPhone Pro and Pro Max, could receive price increases.

During a July earnings call, Cook said he had seen “no obvious evidence of macroeconomic impact” on the iPhone business. But there was pressure on wearables (like watches and AirPods) and the home and accessory business.

Still, the news was good for iPhones. The company made $40.67 billion in iPhone revenue in the second quarter, beating expectations of $38.59 billion.

The real “unknowns” about Wednesday’s event concerned prices during the height of inflation at the time, JP Morgan JPM said,
note published before the call. That really applies to wearable devices, which people consider more discretionary than iPhones, the analysts wrote.

The company’s latest Apple Watch SE starts at $249 with GPS and $299 with added cellular capability. For the Series 8, prices start at $399 with GPS and start at $499 when adding cellular. Billed as a rugged watch for extreme athletes, the Apple Watch Ultra will cost $799.

See also:

Apple’s iPhone 14 event could herald a new satellite era for smartphones

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