Consumer Electronics

Will The World Buy Another $1,000 Smartphone?

The Apple Inc. (NASDAQ: AAPL) iPhone X can cost as much as $1,149. Apple’s sales of its highest-end phone have been brisk, according to outside analysts. And it creates mammoth margins for the company. Rumors are that Apple will launch an upgraded version of the phone and a second one with a larger screen. Once again, Apple is up against the hurdle of how much money people will pay for a new Apple product, as well as how large will the buyer base be.

Among the advantages Apple has is that carriers will basically underwrite the cost of the phone if people take two-year wireless subscriptions. This walks back the price of the iPhone X to between $50 and $55 a month. For the millions of people who own a new iPhone X that is less than a year old, a commitment for a new one may be too much to carry.

Most new versions of iPhones get better processors and better cameras. Since almost all consumers have “good enough” cameras and processors for their needs, the purchase of a new phone could indeed be too much to ask. The iPhone X versions likely to be released are two models: one with the standard 5.8-inch screen and the other with a 6.1-inch screen. Apple is gambling that some people want larger phones. At some point, they will be large enough to qualify as tablet PCs.

iPhone sales and sales momentum are the measures most used often by investors who follow Apple’s share price. Right now, that price is $218, up 35% in the past year. The stock is so high that it would not take much skepticism to trim that run-up.

Apple sells iPhones on the presumption that the new phone is better than the older ones. That is Apple’s gamble again with the new models. At some point, consumers will tire of the modest improvement in features tied to higher prices. Apple won’t be able to hold sales if that happens, and it will.