Apple continues its year of price hikes

When the $1,000 iPhone X was announced last year, Apple watchers...

Posted: Nov 1, 2018 10:30 AM

When the $1,000 iPhone X was announced last year, Apple watchers gasped: Can the company possible get away with charging that much for a phone?

Yes, it can.

The sticker shock has already worn off, and Apple has gone on to hike up the prices of most of its product line. Last month, it raised the prices of its entire iPhone line, and this week it did the same with even more products.

The smaller iPad Pro now starts at $150 more than the previous generation. The MacBook Air is $200 more, the Mac Mini is $300 more, and the Apple Pencil is $30 more.

"They're looking to differentiate and say we don't want to compete with everyone at the lower end, we want to sell something unique," said Wayne Lam, an analyst at IHS Markit.

There are practical reasons for the price increases. Some of the components inside the devices simply cost more to produce. Apple is also trying to cram in exciting — but pricey — new features that may or may not be necessary, such as a fingerprint sensor on a laptop.

But for the MacBook air and Mac Mini, it's also a strategic decision by Apple to try to differentiate itself in a crowded and aging PC market. Most of the computers are fairly interchangeable on the Windows side, said Lam, and many compete by lowering prices for their similar products. Apple seems to be going the other way, raising prices to more "aspirational" amounts and becoming a luxury brand.

The iPad Pro may have had the most surprising price change of the bunch. The new device starts at $799, but a fully tricked out 12.9-inch iPad Pro with a terabyte of storage and cellular connection costs $1,899.

That could be a sign of the future of mobile computing. Powerful tablets have the potential to replace even more laptop sales. But it is also possible tablets could lose out to the increasingly giant phones. Apple continues to make some design choices that keep the two product lines separate, such as not adding a touch screen to its laptops — but that could change down the road.

"That's an area of their product line that we don't quite know where the end game is for them, whether they're going to keep it two separate platforms," said Lam.

Finally, there are the investors to worry about. Most people who need personal computers already own them, and Apple makes money off of the regular upgrades. To make up for any flattening or falling sales, Apple can use price increases to trade volume for revenue and make shareholders happy.

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