Apple didn't hike US iPhone prices — but its new products will boost its bottom line

·Technology Editor

Updated Sat, Sep 10, 2022, 12:22 PM5 min read

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Apple (AAPL) laid out its product roadmap for the next year on Sept. 7, giving consumers a look at its iPhone 14 and Apple Watch lineups, as well as a new pair of AirPods Pro. We largely expected these moves, but that doesn’t mean they won’t boost Apple’s bottom line.

From Apple’s push to make its higher-priced iPhones more appealing with unique designs and chips to its emergency satellite connectivity and high-end Apple Watch Ultra, the tech titan’s latest offerings should help drive product adoption among existing and new users.

“We believe Apple is expecting another heavy iPhone Pro and Pro Max mix shift, which is a clear positive for [average selling price] heading into FY23,” Wedbush analyst Dan Ives wrote in an investor note.

Despite rising inflation, Ives explained, there’s still plenty of demand for Apple’s iPhones. What’s more, the analyst says Apple will likely sell more than 220 million phones in 2023. According to Gartner, the company sold 239 million phones in 2021.

“While the softer macro will clearly play a role in the demand story, we believe the baseline for ~220 million iPhone units in FY23 is likely a low bar given the pent up demand story that we are seeing globally for Apple,” Ives wrote.

It’s not just about Apple’s physical products, though. New hardware should push consumers into subscription services, adding to a business that brought in some $68.4 billion in 2021, roughly 18.7% of Apple’s $365.8 billion in total revenue.

Apple’s pricer iPhones are even more appealing

Apple kept the prices of its existing iPhones the same this year, but the company is clearly pushing users to spend more on their phones.

The Apple Watch Series 8 gets a more powerful processor and new temperature sensor. (Image: Howley) (Howley)

Let’s start with the fact that the company ditched its entry-level iPhone mini, which cost $699. With the mini out of the picture, the new entry-level model is the $799 iPhone 14. Yes, that’s the same price as the iPhone 13 it replaces, but without the mini, you’re now being guided to a pricier phone. Then there’s the new $899 iPhone 14 Plus.

Based on that pricing alone, it’s clear Apple is working to raise the average selling price of its smartphones.

Then there are the Pro models. Apple has made its iPhone Pros the top phones in its lineup for years by adding a third camera and improved displays. But for the iPhone 14, the company chose to give the Pros a new processor, while giving the non-Pro models the same processor as the iPhone 13.

The company also made big improvements to the iPhone 14 Pro camera by adding a 48-megapixel sensor. It also introduced its new “Dynamic Island,” which, weird naming aside, provides some meaningful capabilities, including the ability to view timers, sports scores, and the music you’re listening to.

Those upgrades will make consumers with money to burn want to make the jump from the base iPhones to the Pros, driving up Apple’s average selling price and boosting revenue.

The Apple Watch Ultra shoots for market dominance

The $799 Apple Watch Ultra won’t be for everyone. It’s a larger watch, though not massive, with 36 hours of battery life and enhancements designed for extreme and endurance athletes. The Apple Watch SE and Apple Watch Series 8 will be the volume sellers of this generation, but the Ultra does serve one purpose — it will pull in owners of rugged watches produced by Garmin.

The new Action Button on the Apple Watch Ultra can be programmed for specific activities. (Image: Howley) (Howley)

According to IDC, Apple controlled 30.5% of the global smartwatch market in Q1 2022, up 6.6% year-over-year. If Apple can add those fitness enthusiasts to its own ranks, it will push its market share even higher. That will help it continue to outpace rivals like Samsung, which holds just 10.9% of the market and saw its market share decline 9.9% year-over-year in Q1.

“I think this is a direct play for going at more market share beyond the 50% market,” Ryan Reith, IDC's mobile device tracker program vice president, told Yahoo Finance Live. “I think to me, that’s probably the biggest product.”

The services push continues

Apple’s new Emergency SOS via satellite service captured major attention after it was unveiled this week. If you’ve got an iPhone 14 and find yourself in an emergency outside of cellular or Wi-Fi range, you’ll be able to connect to a satellite to send a message to Apple personnel who will connect you to the proper authorities.

Hopefully you’ll never have to use this feature. On its own, it will likely be reason enough for some consumers to upgrade to the iPhone 14. But the service will be free for two years and then presumably come at an extra cost, which will pad Apple’s Services business revenue.

Then there’s the fact that Apple will no longer require consumers to sign up for its Apple Fitness+ service via an Apple Watch. Asking people to buy a pricey watch to gain access to its service likely kept many non-Apple watch owners away. But opening it up to its broader audience should further grow its bottom line.

Of course all of this depends on how Apple’s products ultimately perform on the market. We should have a better idea this holiday season when the company's sales tend to skyrocket.

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