By Tripp Mickle
CUPERTINO, Calif. -- Apple Inc. on Wednesday unveiled its
biggest and most expensive iPhone lineup ever, making a bet that
larger screens can persuade millions of iPhone owners to not only
upgrade to a new device but also fork over more money than they
spent in past years.
A year removed from the 10th anniversary of a product that
turned it into the world's most valuable company, Apple sought to
enliven its flagship device with standard improvements like
speedier processors and longer-lasting batteries while also touting
innovative features like photo-editing tools and new haptic-touch
technology.
Apple also unveiled a new smartwatch with an edge-to-edge screen
that is 30% larger than previous models, along with sensors that
could help elbow Apple into the cardiac-monitoring market. The
Apple Watch Series 4 comes with an electrical sensor that gives the
device electrocardiogram, or ECG, capabilities to measure a heart's
electrical current in 30 seconds. It is the first of the company's
smartwatches to win Food and Drug Administration approval, showing
the notoriously secretive company is willing to work with
regulators as it pushes into the health industry.
Inside the Steve Jobs Theater at Apple's $5 billion new campus,
CEO Tim Cook and other executives kept the focus solely on the
smartwatch and the iPhone, rather than introduce new versions of
Mac computers, iPads or AirPod wireless headphones.
The star remained the iPhone, which accounts for about
two-thirds of total revenue and remains the company's most
important product.
Apple's highest-priced phone is now the iPhone XS Max, priced at
$1,099, a plus-size, 6.5-inch version of last year's anniversary
model. The iPhone XS, priced at $999, costs the same as last year's
iPhone X and features the same 5.8-inch OLED display. And the new
iPhone XR is a 6.1-inch device with an edge-to-edge LCD display
priced at $749, splitting the difference between last year's iPhone
8 and iPhone 8 Plus prices.
The new models are critical to maintaining sales in a
contracting smartphone market where people hold on to devices
longer, and growth of high-price handsets has stagnated.
Those challenges have clouded Apple's future. Though it became
the first U.S. company to be valued at more than $1 trillion last
month, tech rival Amazon.com Inc. more recently hit that milestone
and is threatening to unseat the iPhone maker as the world's most
valuable company.
To maintain its corporate perch, Apple must squeeze more money
out of its existing customers. An estimated 254 million consumers
use iPhones that are more than three years old and 486 million use
iPhones that are more than two years old, according to Piper
Jaffray, an asset-management firm.
Apple is betting it can persuade enough customers to buy a new
device to improve on the 17% increase in iPhone revenue to $164.66
billion that analysts predict it will deliver in the fiscal year
ending in September, as the iPhone X's nearly $1,000 price tag
offset flat unit sales.
It also is banking on them paying more. The new iPhones have an
average selling price of $949, 15% higher than the three phones
launched a year ago.
"It will be hard to beat, but they are throwing more at it with
a big display increase that will raise the sexiness of the best
phone they offer," said Patrick Moorhead, president of the
technology research firm Moor Insights & Strategy.
When Apple last introduced a major increase in display size with
the iPhone 6 Plus in 2014, annual sales of the device the
subsequent fiscal year soared 52% to $155.04 billion and shipments
spiked 37% to 231 million units. Few expect it to repeat that feat
this year.
Apple is working harder than ever to generate unit sales
comparable to its peak in fiscal 2015. The company last year
shipped an estimated 151 million units of its three flagship
models, flat with the two flagship models it shipped in fiscal
2015, according to Strategy Analytics, a technology research firm.
Meanwhile, the complexity of making three models has reduced its
iPhone operating margins to 30% this year from about 35% in 2015,
the firm said.
"Apple is having to run harder just to stand still," said Neil
Mawston of Strategy Analytics. "It's the classic sign of
maturity."
Apple is aiming to offset stagnant unit sales of iPhones with
rising revenue from a fast-growing services business that includes
app-store sales, streaming-music subscriptions and mobile payments.
The services business jumped 26% to $27.2 billion over Apple's
first three fiscal quarters through June.
The bigger screens are expected to help that business line, as
smartphone users with 6-inch screens or larger typically use twice
as many apps as those with 5.5-inch screens and are twice as likely
to watch video daily, according to Kantar Worldpanel.
Though bigger phones could drive more app sales and other
revenue across iPhones, they could also risk triggering concerns
about excessive smartphone use. After receiving a letter in January
from investors urging the company to address a potential health
crisis due to youth-smartphone addiction, Apple this month will
make available to all iPhone users new software tools announced in
June to let them monitor usage.
"There's a paradox here," said Kevin Holesh, a founder of the
app Moment, which helps people track device usage. "These big tech
companies want people to be engaged with their device but are
realizing the long term detriment of device overuse."
The other growth areas for the company are its so-called
wearables, which include smartwatches and wireless headphones. They
are the primary contributors to a business unit that has jumped 37%
to $13.18 billion in the first three fiscal quarters through
June.
The Apple Watch Series 4, starting at $399, could move into the
cardiac-monitoring market, valued at $1.4 billion, according to
iRhythm Technologies, Inc., which has an ECG product. The functions
Apple touted would reach a small percentage of that market, said
Gene Mannheimer, an analyst at Dougherty & Co. who focuses on
digital health. However, he said it could help expand the market by
bringing in some 15 million adults over 65 who have irregular
heartbeats and don't know it -- a group that could equal $5.25
million in smartwatch sales.
"I don't see this as a game changer for them," he said.
Write to Tripp Mickle at Tripp.Mickle@wsj.com
(END) Dow Jones Newswires
September 12, 2018 15:47 ET (19:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Mar 2024 to Apr 2024
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Apr 2023 to Apr 2024