There’s absolutely no way that Apple would launch the iPhone X and accept a lower gross margin than what it is getting on the iPhone 8.
I’ve heard at least one pundit theorize that perhaps Apple is going to take a hit in margins because the iPhone X is so expensive to manufacture. But here’s where the logic behind that theory makes no sense. Apple controls their own destiny and they chose to launch the iPhone X even though they couldn’t manufacture it in high enough numbers to satisfy demand.
So when Apple financial analysts were doing their cost models they gave upper management the profitability forecasts on delaying the iPhone X until next year or launching it early. Apple would choose the option that yielded the highest profit.
Apple had to know that launching a new model only a month after the iPhone 8 might lead to an overall reduction in iPhone sales. Mac Pro notwithstanding, Apple isn’t typically motivated by criticism from the tech press. They have, however, shown a consistent financial discipline that is the hallmark of well run companies. They generally choose the option that leads to the highest return on investment. This is a business after all, not a church.
In this case, that means that they’re willing to exchange some unit volume loss in exchange for the higher gross margins on the iPhone X. Otherwise, they would have ignored the caterwauling of the tech press and launched the iPhone 8 as their flagship iPhone and reaped their typical unit volume increases. They even had an amazing new color to offer. Even if Steve Wozniak says it’s essentially the same as the iPhone 6, it’s not. The glass back is amazing and if Apple had made it the flagship iPhone, they could have added the stainless steel ring and the full iPhone X camera system with OIS on the secondary camera. It would have been a compelling new model.
But they didn’t do that. Why? Because the gross margins on the iPhone X had to be so freakin’ high that it was worth the risk. Plus, there’s probably still a little bit of “can’t innovate my ass” attitude ringing in the halls of Apple’s new Taj Mahal.
Apple isn’t below offering a product that drags down their overall average. I suspect the Apple Watch is below their average. Possibly barely breakeven. But in this case, with the iPhone X, there is no reason to take the hit.
Regardless, this is one mystery we’ll probably find the answer too. Because with a product line this prominent in Apple’s portfolio. It’ll be evident in their quarterly results for Q1 (Oct-Dec).
Now available in iBooks —> The Tesla Bubble
So when Apple financial analysts were doing their cost models they gave upper management the profitability forecasts on delaying the iPhone X until next year or launching it early. Apple would choose the option that yielded the highest profit.
Apple had to know that launching a new model only a month after the iPhone 8 might lead to an overall reduction in iPhone sales. Mac Pro notwithstanding, Apple isn’t typically motivated by criticism from the tech press. They have, however, shown a consistent financial discipline that is the hallmark of well run companies. They generally choose the option that leads to the highest return on investment. This is a business after all, not a church.
In this case, that means that they’re willing to exchange some unit volume loss in exchange for the higher gross margins on the iPhone X. Otherwise, they would have ignored the caterwauling of the tech press and launched the iPhone 8 as their flagship iPhone and reaped their typical unit volume increases. They even had an amazing new color to offer. Even if Steve Wozniak says it’s essentially the same as the iPhone 6, it’s not. The glass back is amazing and if Apple had made it the flagship iPhone, they could have added the stainless steel ring and the full iPhone X camera system with OIS on the secondary camera. It would have been a compelling new model.
But they didn’t do that. Why? Because the gross margins on the iPhone X had to be so freakin’ high that it was worth the risk. Plus, there’s probably still a little bit of “can’t innovate my ass” attitude ringing in the halls of Apple’s new Taj Mahal.
Apple isn’t below offering a product that drags down their overall average. I suspect the Apple Watch is below their average. Possibly barely breakeven. But in this case, with the iPhone X, there is no reason to take the hit.
Regardless, this is one mystery we’ll probably find the answer too. Because with a product line this prominent in Apple’s portfolio. It’ll be evident in their quarterly results for Q1 (Oct-Dec).
Now available in iBooks —> The Tesla Bubble
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