He thinks the iPhone is a commodity. He thinks the fact that all iPhones cost the same will keep the profit margin on each of those phones ridiculously high. But then he can make it a free download from Apple. The success of the iPhone has to do with its price. I think he is too complacent about how much consumers will pay for the iPhone. His argument is that consumers won’t pay anything more than $14.98 for the iPhone (which includes the cost of the phone, charger, and earphones). So he would argue that the iPhone is a commodity and the iPhone 14 is the version of the iPhone that no one really wants.
But my argument is that while Apple is willing to sell phones for $199 and $29.99 (their current lowest and highest prices for the iPhone 4 and iPhone 4S), they are not going to sell their iPhone for $14.98. They won’t allow it to be a free download.
So, assuming my argument is right, they’ll sell a lot of iPhone 14s, but consumers will look at it and say, “There’s nothing different. I want an iPhone. What are you selling it for?” So Apple would cut the price of the iPhone in half. And consumers would pay for an iPhone. My guess is that that would cost Apple less than $9 million to make that phone, including its manufacturing costs. So Apple would get a much bigger margin than $9 million.
If you take it out of the supply chain, that number starts to come down. So Apple’s cost would be less than $6 million. For a company that makes $15 billion a year, that’s a nice little amount of profit. But there’s one huge problem: How much can Apple sell the iPhone? How much can it sell an iPhone for?
I believe that the iPhone’s revenue is going to be between $15 billion and $25 billion. I think it can sell it for $15 billion and then some. That $15 billion would be selling it for $499. That would give Apple 14% gross margins.
With margins that high, how much could the company sell an iPhone for?
I would say that Apple could sell 2 million iPhone 14s (including the cost of the phone, charger, and earphones) for $499. I could also be overly optimistic in terms of how much consumers are willing to pay for the iPhone. Consumers are willing to pay $199 for the iPhone. They might pay $299 for it. They’re not willing to pay $399 for the iPhone. So I’m going to go with $299 (2 million units).
That would be half of the iPhone’s peak demand. At 14% gross margins (the lowest cost for iPhone) that would be $136.5 million. So that’s about half the profits that Apple has been reporting for the iPhone.
In other words, with margins as high as they are now (more than 90%), they are producing only a portion of what they could sell the iPhone for, if they cut their price to $29.
If consumers pay the maximum amount they are willing to pay for the iPhone, and then Apple would cut the price to $29, that would cut the profit margin on the iPhone to about 30%. Now let’s say that Apple sells 2 million iPhone 14s for $299. That’s $214 million in profits for Apple.
So, my guess is that Apple can sell the iPhone for $29 for a profit of $16 million.
If the iPhone sells 2 million units, they would still have half the iPhone demand. And then they could sell the iPhone for $29. It’s still going to sell about 2 million units. This point in the game, with Apple’s margins as high as they are right now, if they cut the price, they would make about 2.5 times more than they are making at their peak.
They are still selling an iPhone for $14.98, but they are making twice as much in profits on it, because they’re selling the iPhone for $29. How much will consumers pay for an iPhone? I would predict, at $29, that consumers would pay $199 for an iPhone. That would be about half the price that consumers are paying for an iPhone right now.
But now, they are still paying $14.98. That’s the $7 they are going to pay for it.
So the total price is still $14.98. That would make the iPhone 14 a very good bargain. If consumers were willing to pay $99 for the iPhone, they would still be paying $7 for it.
At $29, you would still be paying $7 for an iPhone.
And that would be a very good price for consumers.
I think that Apple’s iPhone 14s will sell for $29.
Is that going to make Apple more or less profitable?
That would make it even more profitable.
$29 for an iPhone. That’s great for consumers.
If consumers are willing to pay $299, they could buy the iPhone 14 for $199. That’s $6 for the iPhone.
That’s a very good deal.
If you are a smartphone vendor and you are selling an iPhone at $29, it’s a great deal for you. That would probably make you even more profitable than you are right now. So, with $29 you are making $14 for a smartphone. So you still have a gross margin of about 90%. As long as you’re still making a lot of money at 90%, then that would be a great deal.
But even at 90% gross margins, if you are selling an iPhone for $29, you would probably be making much less money than you are right now. If you sell an iPhone for $29, you are going to have an iPhone 14 selling for $99. Would make you even less profitable.
Apple is going to make much more money if they sell the iPhone 14 at $29, even though it costs $29 to produce. Even if you sell the iPhone 14 for $29, you are going to make a lot less money than you are making right now. That’s the key.
So what is the iPhone 14 going to cost?
How much will consumers pay?
It’s going to be expensive. That’s what I’ve been saying all along. It’s going to be expensive.
It’s going to cost about $500 to produce the iPhone 14.
That’s about half the price of the iPhone.
So you’re going to sell the iPhone 14 for $500.
And you’re going to make about $200 in gross profits.
If you sold the iPhone 14 for $299, you would make about $200. That’s the difference.
So even at $299 you’d be making $200 in gross profits.
Is that going to make the iPhone 14 a much better deal for consumers than it is right now?
If consumers are willing to pay $29 for an iPhone, then you would probably have a much better deal than you do right now.
At $29, consumers are paying $7 for the iPhone.
But at $29, consumers are paying $5 for the iPhone.
The consumer could buy the iPhone 14 for $25.
That’s a good deal.
But with the current deal, they are still paying $7 for the iPhone. So, that’s a good deal for the consumer.
The iPhone is a little more expensive than the Android handset that is in the market right now. But still, compared to the Android handset that is in the market right now, the iPhone is very inexpensive.
On an $8 iPhone that’s a good deal.
It’s a good deal even compared to the Android handset that is in the market right now.
When you see a smartphone cost $200, that’s a really good deal.
So, for consumers, if you are an electronics retailer, you should be considering selling an iPhone 14 for $29 or even $49.
That’s a good deal for consumers.
So it’s a good deal for consumers, even if you are an electronics retailer.
It’s a good deal for the consumer.
It’s a great deal for you, Apple.
So $29 is a good deal for the consumer.