Apple just launched its most expensive smartphones ever in the US, with the iPhone XS base model starting at $999 and the iPhone XS Max topping out at $1,449. To put this into context, some iPhones now cost more than Apple MacBook Pros.
These two high-end phones build on last year’s holiday-season iPhone X release, which introduced a re-imagined device with a new edge-to-edge screen (minus the camera “notch”), facial identification and gesture interaction system. This year’s new line-up features an upgraded microprocessor, more advanced camera and more durable screen. A third, less expense device, the iPhone XR, will become available on October 26 with a base price of $749.
With one full week of sales under its belt, how successful was Apple’s new launch? In this report, Flurry looked at device activations of the iPhone XS and iPhone XS Max from Friday, September 21 through Thursday, September 27. Flurry Analytics, part of Oath, is used by over 1 million mobile apps and has insight into 2.5 billion devices worldwide.
Let’s start by reviewing a detailed breakdown of all iPhones, new and existing, used over the iPhone XS and iPhone XS Max first full week after launch, September 21 - 27.
During their first full week, the iPhone XS and iPhone XS Max gained a market share of 0.42% and 0.68%, respectively, for a total of 1.1%. To determine if this launch is a success, let’s compare it to last year’s 8 and 8 Plus.
Apples to Apples, Sort of
One year ago Apple released the iPhone 8 and 8 Plus on September 22, 2017. Over their first week of sales, the iPhone 8 and 8 Plus devices claimed 0.76% percent share of the Apple device base. By comparison, the XS and XS Max captured 45% more share, which is a strong improvement. But before we draw a conclusion, we need to acknowledge that the comparison is close, but not exactly apples to apples.
As we compare this versus last year’s launches, we have to consider price sensitivity. In short, Apple is releasing a less expensive device later this holiday season (the XR follows the XS and XS Max). Last year Apple reversed the order, leading with the less expensive 8 and 8 Plus devices first, followed by shipping the more expensive, re-imagined iPhone X later in the season. Price sensitivity affects buying decisions. If you like to have the latest and greatest device, and don’t care about price, you likely waited until later in the season to buy the more expensive iPhone X. This year, early adopters may be purchasing now, choosing the iPhone XS Max.
So Many Apples from the Tree
Another factor is Apple’s mounting competition - with itself. The XS and XS Max enter the market filled with a backlog of Apple devices: 15 to be exact, and that’s only counting the iPhone 4 model or later. While Apple actively discontinues the new sales of certain devices - and lowers the prices of older models still supported - some consumers hang on to older device models instead of upgrading. Not only does Apple compete with more of its own (and other manufacturers’) devices each time it ships a new one, but it must also find ways to dramatically improve the latest model in order to compel consumers to replace their current devices. In other words, as each consumer thinks about buying a new device, it’s not just about the price they’re willing to pay, it’s also about what they’re getting for it. If this year’s thousand dollar purchase gets a consumer a bigger improvement over last year’s purchase, consumers may be more willing to spend again. But those big jumps in hardware improvements seem to be getting harder to deliver each year. Consumers may simply believe the device they already purchased is good enough for them, and forego upgrading.
While the XS and XS Max sales appear strong during their first week, we believe that trend will continue over the holidays, further supported by the release of the XR. We get to this conclusion by comparing the revenue generated from two groups of devices:
- 2017: 8, 8 Plus (released Sep 22 - 28, 2017) and X (released Nov 3 - 9, 2017)
- 2018: XS, XS Max and X (all incremental unit sales from Sep 21 - 27, 2018)
From this comparison, taking unit sales of the different devices and multiplying them by the different prices from each time period, we estimate that Apple generated 7% more revenue during week one of the XS, XS Max and same-week incremental sales for the iPhone X (now offered at a discounted rate), compared to the combined sales of the 8, 8 Plus and original iPhone X during their respective first week. What it shows is that the entire X line is in demand. Consumers are buying the discontinued, lower-priced X aggressively, and the more improved and even lower priced XR is not out yet. When that ships, we believe sales will be strong. And when we look at the ratio of sales between the XS to the XS Max, the XS Max is selling 1.6X more than the XS. That shows that people are willing to pay higher prices, and could indicate that Apple still has headroom to push higher into super premium price ranges in subsequent years.
Our net takeaway is that Apple is able still able to drive solid market share uptake with its latest devices, but is also actively raising prices to keep revenue growing. The strategy appears to be working, and they are well positioned heading into the holiday season. We look forward to sharing more insights as the holiday season progresses.