Analyst Peter Misek, via StreetInsider, is saying that Apple is looking to raise iPhone 6 prices by as much as $100. Misek claims that Apple has been actively negotiating the increase with carrier partners.
Misek says that Apple can leverage the iPhone 6’s market power to force carrier’s hands. He says that carriers believe the iPhone 6 will be the only headline-worthy phone this year and that carriers need the iPhone to retain subscribers.
But we think this general lack of differentiation could be the reason why Apple may be able to get a price increase. Carriers realize that the iPhone 6 will likely be the only headline-worthy high-end phone launched this year and that they will lose subs if they do not offer it.”
Misek says that a $50 increase in average selling prices for the next-generation iPhone could increase Apple’s EPS by 11%.
An ASP increase could offset iPhone 6 gross margin headwind, according to Misek. “Our prelim iPhone 6 BOM est indicates GM could be up to 450bp lower than the 5s (pricier display/AP partially offset by general 5%-10% price concessions),” he notes. “Our current estimates assume a 430bp decline, which we feel is conservative unless some of the components run into yield issues. We estimate a $50 ASP increase on the iPhone 6 would raise GM by 375bp and $100 by 700bp so a $50 ASP increase would offset most of the iPhone 6 COGS pressure.”
Misek said a $50 iPhone 6 ASP increase would raise revenues EPS by 2%/11% and a $100 increase by 6%/24%.
Whilst it is true that the iPhone has staggering market power, it is hard to believe that Apple will up prices away from the norms they have established over the past seven years. In fact, the trend recently has been that Apple needs to lower prices for iPhones, not raise them, as demonstrated by Apple’s introduction of the iPhone 5c last year.
As StreetInsider notes, raising prices will likely hurt sales of unlocked iPhones — a purchase method that is steadily increasing in popularity.
Misek’s track record with Apple predictions is also not great by any measure. The analyst has claimed multiple times that the iTV is on the horizon. More recently, he said that the iPhone 5s will come in eight different colours, feature NFC and launch in June.
With the possible introduction of two iPhone 6 models (both 4.7inch and a 5.5inch variants) it is possible that the larger iPhone may come with a higher price point to match. However, at this point it is really hard to believe that Apple will budge from the base $99/$199 price points it has instated for the last several years.