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The latest iPhone hits stores on Friday, and Apple Inc. is counting on well-heeled shoppers to make the device a hit during a year of tumultuous inflation and uncertain tech spending.
The iPhone 14 lineup reserves the best features for high-end Pro models priced at least $1,000. And based on pre-order data, the strategy is already working with consumers, who have made the most expensive new iPhone the most popular version.
Although overall spending on mobile devices and computers is slowing this year, there is still an appetite for high-end smartphones – Apple’s strength. This has allowed the company to keep production steady at a time when much of the industry is cutting back on plans.
“Data continues to point to strong demand for the iPhone 14 Pro and Pro Max, which could have a materially positive impact on both mix and margins,” Evercore ISI analyst Amit Daryanani said in a note this week.
The iPhone 14 line was unveiled earlier this month alongside new Apple Watches and AirPods. The company didn’t raise prices, a surprise to analysts who thought inflationary pressure would force the move. But Apple is still attempting to upsell consumers more than ever before.
The standard iPhone, which starts at $799, doesn’t even run Apple’s latest processor, the A16. Instead, it uses the same A15 chip as last year, with the A16 going into the Pro models. The Pro phones also get significant camera improvements and a new interface called the Dynamic Island.
That’s left users with less reason to upgrade to a basic iPhone 14, but plenty of incentive to pay a little more for the Pro. A flurry of carrier promotions and trade-in offers also may coax consumers into buying a glitzier model.
Apple reshuffled its display configurations this year as well. Gone is the mini version of the iPhone. Instead, the company is betting that consumers want more screen real estate. The non-Pro iPhone 14 will come in a 6.1-inch model and a 6.7-inch Plus version that won’t be available until Oct. 7.
The iPhone 14 series was unveiled earlier this month, along with the new Apple Watch and AirPods. The company did not raise prices, which came as a surprise to analysts who thought the move would force inflationary pressure. However, Apple is still struggling to increase consumer sales more than ever before.
The standard iPhone, which starts at $799, doesn’t even run on Apple’s latest processor, the A16. Instead, it uses the same A15 chip as last year, with the A16 going into the Pro models. The Pro phones also get significant camera improvements and a new interface called Dynamic Island.
That leaves users with less reason to upgrade to the base iPhone 14, but plenty of incentive to pay a bit more for the Pro. A flurry of carrier promotions and trade-in offers can also entice consumers to buy a shinier model.
Apple has also reorganized its display configurations this year. Gone is the mini version of the iPhone. Instead, the company is betting that consumers want more screens. The non-Pro iPhone 14 will be available in a 6.1-inch model and a 6.7-inch Plus version that won’t be available until October 7.
Pre-order data suggests the iPhone 14 Pro Max is more in demand than the same model last year, part of an upscale shift, according to a report by KGI Securities.
The question now is whether this momentum is strong enough to push Apple through a broader slump. The global market is expected to fall 3.5% to 1.31 billion units this year, according to market research firm IDC.
In China, which is both a manufacturing hub for Apple and a key market, smartphone sales have slumped this year. However, Apple’s shipments rose 5%, compared with an overall decline of 23%, according to Evercore ISI’s Daryanani.
“Apple continues to gain significant share in China and we expect that share growth to continue,” he said.
A successful iPhone 14 launch could help ease investor jitters after the month-long roller coaster ride. Stocks have bounced between gains and losses in recent trading sessions, with shares suffering their worst one-day decline since 2020 on Tuesday. The higher-than-expected inflation report and concerns about interest rate hikes hit tech stocks in particular.
Apple shares are down 14% for the year, though that’s slightly better than the S&P 500, which is down 18%. The tech-heavy Nasdaq Composite Index fell 26%.
Analysts expect Apple’s sales to rise 6% this quarter, a slowdown from the 29% increase they saw a year earlier — when pandemic-bound consumers were still reaching for technology. The iPhone 14 is coming out a few weeks earlier in the year than usual, which should help boost Apple’s revenue in September. The company’s biggest sales period of the year is usually the December quarter, boosted by holiday spending. Revenue is expected to rise 3% in the period, according to analysts’ estimates.
The iPhone is unrivaled among Apple products in its importance. It provides about half of the company’s total revenue and helps drive sales of other devices, including the Apple Watch and AirPods. Both of these categories were revamped during the recent launch, further emphasizing the company’s focus on premium products.
The company unveiled an updated AirPods Pro and the first-ever Apple Watch Ultra model, which — like the iPhone Pro — is designed to be bigger and better. And of course it will cost a little more.