Following reports from Goldman Sachs, Nikkei, Fast Company and KGI Securities’ famed Apple AAPL +0.28% analyst Ming-Chi Kuo that Apple will start iPhone 8 pricing from $1,000 is more evidence to explain why.
In short: no iPhone has ever been this expensive to build.
Shedding new light on this is the Economic Daily News (via DigiTimes). It reveals longtime Apple component supplier TPK Holdings has quoted 2-2.5x the price for integrating 3D Touch into the 10th anniversary iPhone’s display - and Apple has accepted. This works out as $18-22 vs $7-9 in previous generations.
Why? The move to OLED: “The solution directly bonds 3D Touch sensors on LTPS TFT-LCD display panels of the iPhone, but 3D Touch solution for OLED panels entails bonding of a glass cover on the front and back side of an OLED panel each to reinforce the fragile OLED panel,” claims the Economic Daily Times.
What’s more, this is just the latest in a series of component price rises.
Goldman Sachs says the OLED itself will add $35 to the overall manufacturing cost, new “3D sensing” technology (expected to be in the camera) adds an additional $20 and upgraded memory will be $16-29 more expensive that last year.
Combined with the new 3D Touch module, these areas total roughly $100 and may be just the tip of the iceberg. After all long overdue wireless charging and quick charging are also expected to arrive with this generation along with Touch ID integrated into the display. So given a 256GB iPhone 7 Plus already sells for $969 (and Apple needs to maintain its industry leading profit margins), $1,000 actually seems conservative.
Despite this - and fears of a dull ‘Plan B’ backup - Goldman Sachs says “we believe Apple has now locked down the design." This would mean Apple has also committed to manufacturing costs and therefore the knock-on effect they will have on retail pricing.
Of course Apple isn’t shy about raising prices. The company increased MacBook Pro prices dramatically (and controversially) with the most recent generation and both sales and brand loyalty for the range continue to be strong. Furthermore iPhones have the considerable benefit of their cost being spread out via long term carrier contracts.
So the arrival of the $1,000+ iPhone is coming and Apple looks set to reap the reward, on one condition: It gets it right…