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Apple’s price hike strategy is paying off

Apple’s price hike strategy is paying off


Apple devices are getting more expensive across the board, helping the company earn more per device

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Photo by James Bareham / The Verge

Despite a zero percent change in iPhone unit sales year over year, Apple ended its fiscal fourth quarter with a 29 percent revenue increase in its smartphone division. It also met its overall revenue target of $62.9 billion — up from $52.5 billion this quarter last year. Both sales and profit exceeded Wall Street expectations for the quarter.

Apple’s Q4 quarter ended in September, meaning it only accounted for the first few weeks of the new iPhone XS and XS Max going on sale. (The iPhone XR, which was also announced in September, did not become available for preorder until October.) Despite the slow sales growth, the average selling price per iPhone is now $793, up from $724 in Q3.

The increase suggests that Apple’s price hike strategy appears to be working; the trillion-dollar company introduced its first smartphone to cross the thousand-dollar starting price in 2017 with the 10th anniversary iPhone, and continued the trend of pricier phones this year with the $749 iPhone XR, $999 iPhone XS, and $1,099 iPhone XS Max. (It also discontinued its cheapest $399 iPhone SE after the announcement.)

Apple’s 2018 MacBook Air refresh
Image: Apple

Apple also announced new iPad and MacBook devices at an event this week. The starting price of the refreshed MacBook Air is now $1,199, up from $999, and the Mac mini starts at $799, up from $499. Accessories are also seeing a price bump: the new Apple Pencil 2 costs $129 — up from $99 — and the new Smart Keyboard starts at $179, the price of the most expensive version of the folio’s previous model. The more expensive Apple products come as the Cupertino company stated to the US Trade Representative last month that proposed tariffs by the Trump administration will make Apple products — including the Apple Watch, AirPods, and chargers — even more expensive.

Meanwhile, Apple’s Services division, which includes AppleCare, iCloud, and Apple Music, reached an all-time revenue record of $10 billion. (It should be noted that the costs to fix Apple products seem to also increase alongside them, with the new iPad Pro costing as much as $649 to repair without AppleCare+.) iPad sales were expectedly down compared to last quarter ahead of this week’s keynote, while Mac sales saw a unit increase of 42 percent after a new MacBook Pro was announced in July

With many new Apple hardware announced this week and priced at their most expensive yet, Apple is naturally forecasting a strong holiday quarter ahead, with a fiscal Q1 revenue expected between $89 billion and $93 billion, up from $88.3 billion this time last year. It’ll be harder to calculate the average selling prices of iPhones, Macs, and iPads going forward, though. Apple’s Chief Financial Officer Luca Maestri announced during the earnings call that the company will no longer disclose unit sales starting next quarter, claiming that those numbers do not accurately represent sales performance.