Date
18 October 2018
Philip Schiller, Senior Vice President, Worldwide Marketing of Apple, speaks about the new iPhone XR at Apple’s product launch event in Cupertino, California, on September 12. Photo: Reuters
Philip Schiller, Senior Vice President, Worldwide Marketing of Apple, speaks about the new iPhone XR at Apple’s product launch event in Cupertino, California, on September 12. Photo: Reuters

Why XR may fare better than Apple’s other new iPhones

With Apple unveiling its latest smartphones at its annual product event last week, we can now pose this question: of the three new iPhones, which will emerge as the bigger winner in the marketplace?

Before we arrive at any conclusions, let’s first take a quick look at the new devices and their features and pricing. 

As widely anticipated, Apple launched two phones with OLED displays and one with an LCD screen. The models bearing the sharper displays, featuring the so-called super retina OLED panels, are the iPhone XS and the iPhone XS Max.

XS has a 5.8-inch screen and has a starting price of US$999, while XS Max comes with a 6.5-inch display and a starting price of US$1,099. Both the devices come in stainless steel casing.

Meanwhile, the third new offering is the iPhone XR, a 6.1-inch model that features an aluminum body and will start at US$749.

Going beyond all the hype, a deeper look at the new products informs us that the iPhone XS series represents just a minor upgrade from the iPhone X of 2017. Apart from the giant screen in the Max model, there is nothing really to prompt consumers into expensive upgrades.  

Frankly speaking, it is the lower-priced XR, rather than the other two more glamorous-sounding offerings, that could appeal to more shoppers and enjoy better demand.

The XR has a bigger display than last year’s iPhone X, despite costing less, and its battery life is said to be better than that of the iPhone 8 Plus.

Featuring an advanced processor and also offering six options in terms of finish — white, black, blue, yellow, coral, and red — XR will be a colorful affordable option for smartphone users.

Apple may be hoping for stronger sales of the premium-priced products in order to drive margins, but it is the cheaper XR that may actually provide the bigger revenue boost for the firm.  

At a time when the smartphone industry overall is witnessing a slowdown, it is the more competitively-priced XR that could score over the other new iPhone models in terms of unit sales.  

After the launch event, Apple started to take orders for the iPhone XS and iPhone XS Max last Friday. What is interesting to note is that availability of the products will be sufficient for buyers to be able get their phones as early as the last week of September. They don’t need to wait for a month, unlike in the past.

Market watchers say the iPhone XS series has become a luxury category, and not all consumers will be able to afford to buy those products. In Hong Kong, the starting price for iPhone XS with 5.8-inch screen is HK$8,599, while the iPhone XS Max with 6.5-inch screen starts at HK$9,499.

From Apple’s perspective, the role of iPhone XS is to uphold the firm’s profitability and profit margin. There is no doubt that many phone users prefer a bigger screen, as it would offer better experience while watching video or playing online games.

Given this, the 6.5-inch model could perform better than the 5.8-inch screen version. The XS Max, as a matter of fact, could be viewed as a fight-back by Apple to lure back people who may have switched to Android devices due to large-size products from firms such as Samsung, HTC, LG and Huawei.

That said, Apple did not put too much upgrade into this year’s flagship. There is nothing special that would prompt existing iPhone X users to upgrade to iPhone XS series in large numbers, if you discount elements such as a new gold color, a 6.5-inch screen and a newly-launched 512GB storage.

Long-time Apple analyst Ming-Chi Kuo said in a research note over the weekend that he believes iPhone XS pre-orders are “lower-than-expected,” as customers opt for the iPhone XS Max or may be waiting for the iPhone XR.

Kuo trimmed his forecast for iPhone XS orders, estimating now that the model will account for only 10-15 percent of shipments of the new 2018 iPhones, compared with a previous projection of 15-20 percent.

According to Kuo, iPhone XS Max pre-orders have been in line with expectations, signifying the success of Apple’s high-pricing strategy. The analyst believes XS Max may account for 25-30 percent of the new iPhone model shipments in the second half this year.

Looking at the overall picture, it becomes apparent that Apple will rely on the iPhone XR series to boost shipment volumes and lure users from the Android camp.

The iPhone XS, on its part, is positioned as a premium product for Apple’s loyal customers, mainly to drive margins with higher prices.

For mass-market users, iPhone XR would be more attractive than iPhone XS given its cheaper price — which starts at HK$6,499 in Hong Kong — and the varied color options. The colorful look and aluminum casing would make the XR a higher-end product compared to many Android phones on the market.

According to some media reports, contract manufacturer Foxconn has devoted 27 production lines for the iPhone XR at the firm’s Zhengzhou plant, giving the product the most output capacity out of the three new iPhone models. The plant is said to be making an average of 300,000 XRs every day to meet the market demand.

The XR specifications suggest that Apple is hoping to lure new users to the iPhone club by offering a bigger screen, a better-quality camera and colorful look. Android phones seldom come with multi-color options. Meanwhile, dual-SIM capability will also help broaden the appeal.

Given its lower pricing and dual-SIM support in China, the XR, which will be available to pre-order October 19, could see strong take-up in this region, putting the other two iPhone models –especially the XS — in the shade.

– Contact us at [email protected]

RC

EJ Insight writer

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