John Gruber recently wrote up a terrific post trying to make sense of the various rumors which have been circulating about the next generation iPhones. Read it here.
As always, I think John is spot on with a majority of his analysis. The biggest wrench in the predictions is Kuo’s surprising prediction that the phones will only come in 64GB and 256GB flavors. Even if this is true, I find it hard to believe Apple will be offering the 256GB iPhone 7S plus at the 8xx(1) price point, but if they do that’ll be an extraordinary value.
So this brings us to the fabled iPhone “something more”, which was initially pitched in the rumor mill as the iPhone 10th anniversary edition. Gruber initially posited this phone should cost over $1,500, and immediately he received a lot of grousing from people saying that was too high. He has since amended this decision and is putting the price point at a slightly more reasonable $1,299 and $1,399. I’m pretty sure it was this thought that lead to the writeup, and it’s certainly what is inspiring this post. Let’s break this idea down, because I’m suspicious John’s first guess is more reasonable.
Apple has been a big fan of bifurcating their lineup between a high end device and a low end device. As Gruber mentions in his post, Apple has traditionally done this in two separate ways, either by offering greater functionality, Pro, or premium design, Edition. So which one makes more sense for the iPhone?
Apple has been super into “Pro”ing everything these days. Last year we were introduced to the iPad Pro, and this year the iMac got the special treatment. We now have a Mac Pro, a MacBook Pro, an iMac Pro and an iPad Pro, so right off the bat this seems like a pretty likely scenario. A bit of an aside, but if you pay close attention to the retail side of things, Apple has done the same thing with their employees, and now offers a variety of roles in a “specialist” and “pro” flavor.
When Apple has done these Pro models they have fit two common themes. First, they carry around a 30% premium, and they offer functionality for advanced users who likely would be using the device for some form of commercial purpose. The longest running line of “Pro” has been the MacBook Pro, and for most of its life you have traded weight, battery life and the pricing premium in exchange for superior traditional components (processors, GPUs, memory). This makes sense as if you are using a laptop for professional purposes, you are probably running software which would benefit most from these additions (Adobe suite, virtualization software, and content editing).
There was a brief period where things got kind of weird and the only real advantage the Retina Pro was giving you over the later editions of MacBook Air was an option for discrete video cards in the 15” and a Retina display. The processors in the MacBook Pro were only marginally faster and that basically only served to power the additional pixels in the Retina display. Now with the MacBook, there is a much clearer divide again between the Pro and standard models, the MacBook focuses on form factor and responsiveness and the MacBook Pro focus on power. At the moment Apple is unable to provide MacBook at the lower price point and so the Air still exists, but the writing is on the wall.
The iMac is very similar, and gets designated as a Pro with its super specialized workstation class hardware. Running Xeon processors, ECC RAM and the Vega line cards, there is absolutely no doubt where your extra 30% is going. I’m counting the 30% as over the cost of the mid range 27” iMac as that feels like the true standard comparison to the iMac Pro. The 21” is basically a different product category in my view.
The iPad becomes Pro by virtue of offering accessories which dramatically improve content creation. Certainly the iPad can be used to create content, but the Apple Pencil, connected keyboard, and improved GPU all directly address the ways in which an iPad can be used to produce rather than consume. ProMotion doesn’t quite fit in this matrix, but it is the sort of thing which active users will immediately recognize and demand whereas passive users will be less likely to notice. Also, I suspect ProMotion will eventually come to the standard iPad whereas I won’t be surprised if Pencil support never does.
It didn’t get the same naming structure, probably because it hasn’t been updated in so many years, but the Mac mini also has a similar division where the server edition costs about 30% more than the higher cost configuration and offers the second hard drive and server functionality that is common among people who use the Mac mini for commercial purposes.
So the pattern is clear, if you are going to be a Pro, you need to provide additional functionality for the people who would be tempted to use that form factor for commercial purposes. Well, what does that look like for an iPhone? Apple did only put the A9 processor in the 2017 iPad, while giving the iPad Pro the fancy A10X. Would this mean that Apple would put the A10, maybe clocked slightly higher, in the 7S and plus and save the A11 for the iPhone? I guess it’s possible since the A series processors have effectively lapped the competition and Apple could get away with putting a year old generation processor in the 7S and still have it be the fastest phone on the market, outside of this new premium iPhone.
Still, this seems weird. First off, seems like a lame upgrade from the 7 if it doesn’t include an updated processor configuration. What exactly are you paying the extra money for if you’re not getting superior components. Additionally, on the iPhone, a faster and faster processor is nice, but isn’t inherently game changing. It basically just makes things a bit snappier, hardly worthy of the "Pro" denomination.
When I think of how people would professionally use an iPhone, I see it as a premium recording device. The camera is finding its way into more and more professional photo shoots, and Apple has started to pitch the iPhone as the microphone for people looking to launch podcasts. I think a Pro iPhone would make most sense if it was able to address these situations for more and more commercial purposes.
This also would justify using the iPad's Pro X series processors, as on the iPhone the camera is basically the only internal component which takes advantage of all that power. If you were to try and perform all the image adjustments Apple performs on the fly with an Intel processor, you would see it crumble to its knees in comparison to the A series which has been optimized completely for those routines. Additionally, we’ve seen with the MacBook Pro that Apple is willing to compromise slightly on device form factor to deliver "Pro" performance. Would the iPhone Pro possibly be slightly thicker, allowing for drastically improved optics and acoustics as well as increased battery performance?
On the one hand, if Apple makes an iPhone Pro, this all makes a ton of sense to me. We haven’t seen any rumors that this is the case, however, and since it seems clear that Kuo’s sources come from the supply chain, you’d think he would be aware of any fancy camera components being used. If Apple does go this route, it would make sense for the iPhone to be intended to be purchased by a large quantity of "Pro" users and so the pricing would be about 30% higher than the plus series, putting it around $1,200-1,300. If this is the case, it is easy to see how Apple continues to "Pro" line for years down the line, continuing to place premium recording equipment and the necessary guts to power them in the device.
The rumors, however, have pegged the defining feature of the Pro to be a fancy, mostly bezel-less display. This does not strike me as a Pro level feature, but as a much desired design feature. In this case, Apple would almost certainly prefer to be offering it in their standard iPhone configurations, but much like Retina, does not feel it can introduce it yet to the standard iPhone. With the computer this was about price, but with the iPhone, this is about manufacturing.
Rumors about this display have flown all over the place with regards to how it will handle Touch ID and device authentication. The major issue is that it is extremely difficult to embed the Touch ID under the display, and so the manufactures which have offered this type of display have all moved their “home” button to the back of the device. This is a crummy, crummy solution. Personally, I use my iPhone heavily while doing other things with my hands and the phone resting on a table. Putting the sensor on the back would require lifting up the phone every time you wish to use it beyond the basic functionality the user chooses to enable without unlocking the device.
The other rumor has been that Touch ID will disappear entirely and that facial recognition is going to completely replace it. Maybe this will end up as claim chowder, but I think that’s about as likely as Apple just deciding to pack up shop and sell off the company. Touch ID is a major distinguishing feature of the platform and the A series chips, has been a major factor in Apple’s negotiations with banks over supporting Apple Pay, and has even made its way into the latest MacBook Pros.
Touch ID is such a terrific solution as it works incredibly fast, is very reliable, and allows the user to have a lot of control over if they are wanting to authenticate the device. If facial recognition is the only way to do this, anyone can grab your phone and hold it in front of your face for a moment, most notably law enforcement. Apple has been pretty keen about ensuring that it is the user who is wanting to unlock the device, not the Feds. I think facial recognition is coming, as it seems like a nice additional authentication method, but I don’t see how it wouldn’t be much nicer to have both options and not jettison Touch ID. I also won’t be surprised if facial recognition allows you to unlock the device but not authenticate payments or gain access to locked notes and such.
There have been some rumors that Apple has cracked the embedded Touch ID issue, but that production will be severely impacted. This seems the most reasonable rumor to date, which leads me to the thought process that it is likely the premium iPhone will need to carry a substantial price premium if it the goal is to limit demand for the device.
Apple has already shipped a device which is of a premium design, the Apple Watch Edition. The first version was the much ballyhooed gold watch, priced at a staggering $10k. Before the launch of the Apple Watch, I knew of a number of watch wearers who swore they would only wear gold watches. I was always suspicious this is why Apple released the gold edition, to test the waters and see if it was a necessary slice of the market. As it turns out, nearly all of those people were speaking out of turn, as a smart watch provides functionality beyond fashion justifying its presence, but all that functionality comes at the cost of being a device you wish to update somewhat regularly, which puts that 10k price point as excessive to all but the smallest fraction of consumers. Thus even people who were “all gold” suddenly were more interested in the stainless steel version of the Apple Watch.
Thus I think the 2nd Apple Watch Edition is a much better guide. It’s made of a premium material, ceramic, which for a number of reasons is superior to aluminum or stainless steel, but which for the time being simply cannot be manufactured at the scale you’d need even for the Apple Watch, let alone an iPhone. The stainless watch does get you a ceramic backplate, so it’s clear Apple is wanting to move to the material if it were possible.
I think this is a nice analogue to what it would be like for bezel-less display. Apple wants to deliver the solution to everyone, but due to manufacturing scale, it is simply not an option for a device like the iPhone. With the watch, this doubled the cost in order to ensure that most people stick with the stainless version, and so I think a similar thing would need to happen with the iPhone if you are wanting to substantially reduce sales, meaning we’re looking at least at $1,500.
Looking at this closer, I think you’ll see my point. Back before Apple started offering a plus size iPhone, all the rage was that Apple needed to offer a lower cost device to increase their marketshare. Apple created the 5C to test these waters, and while the phone was hardly a flop, it became pretty clear to everyone that people wanted to own a flagship iPhone, even if it was a year or two old. The iPhone is an aspirational device, it’s the computer everyone touches the most, and it’s the device everyone sees you with the most. People who buy iPhones are doing so generally for a mix of the premium user experience and the status it provides. People in the market for an iPhone don’t blink about an extra hundred dollars if it means they get that aspirational element.
So Apple pushed it the other direction with the plus model and had far, far more success. We’ve never seen full statistics, but it takes only a cursory glance around you in a public place to see that the plus model is more popular than the SE. While there is certainly a market for people who want the comfortable form factor, looking through my Twitter feed makes it clear many people have gutted through owning the plus model for the premium camera rather than the small number of people who have eschewed the standard model for the SE.
Clearly a couple hundred dollars is not substantially lowering the sell through rate. Additionally, with the iPhone, the best way for someone to pay for an iPhone, both from the consumer’s perspective and Apple’s, is with the iPhone Upgrade Program. Currently only available in the US, the system allows the consumer to break out their payments over 2 years, but still gain all the advantages of having purchased the phone outright such as being unlocked and not tied to a contract or carrier while also not creating the same sticker shock and giving the user the opportunity to own every single iPhone. Seriously, if you live in the US and have a credit card and are not yet on iPhone Upgrade Program, take a long hard look at it, because almost undoubtably it is the right decision for you.
For the ever increasing number of users who purchase the phone this way, you take the cost of the iPhone, plus Apple Care, and divide it by 24, theoretically paying off the phone every two years. For an iPhone 7 plus with 256 GB, this will put you back about $1,100 today. Even if Gruber’s scenario 1 plays out, that’s still a $1,000 device. Divide by 24 puts you at $42 or $45 a month. If the phone only costs $1,200, then basically everyone who owns an iPhone could upgrade to the premium phone for almost the same monthly cost as their plus series phone, and even the “bargain” standard iPhone comes at $32 a month. Presented with the option to only spend $10 more a month to get the screen real estate of the plus phone in almost the same form factor as the standard model, I’m willing to bet a HUGE number of standard iPhone consumers would jump on the opportunity.
Now, if you put the phone at $1,500, you jump all the way up to $67 a month, and that sounds like a legit breaking point for the vast majority of consumers. At that point, it suddenly becomes tough to justify that increase unless you legitimately have a considerable amount of disposable income to devote to your phone, and thus an Edition model is born.
If all of this is the case, it also would make sense that the Edition model would only be offered for a couple years at most. Inevitably, Apple will find a way to bring the technology to the masses, and once that happens, there is no clear reason to keep the Edition model. Maybe at that point they could bring ceramic to the smaller demographic, and the line would live on, but I wouldn’t be surprised if this didn’t happen. I'm not convinced that every single year there will be an obvious design element which can be produced for a small number but not the masses in order to justify the Edition's annual presence.
Basically, I think all of the consternation Gruber’s initial tweet caused is precisely what is necessary if Apple is needing to limit the quantities of the device being sold. If an edition model of the iPhone is going to exist, it needs to be priced such that almost all of us would roll our eyes and move on like what happens with the ceramic edition watch. Quite simply $1,200 and below is not enough to make that happen. In summary, either Apple offers an iPhone Pro and the people reading this likely buy one, or they offer an iPhone Edition and hope that all of us don't.
1 I’m suspicious Apple would prefer the plus series phones to cost $x49 not $x69 as occurred this last generation. I suspected this was due to the premium nature of the dual camera system and that Apple would work to quickly drop that back down overtime.