Mobile Week in Review

The inflation-free iPhone 14.

The long wait for the new iPhones is over as Apple revealed its newest addition to the franchise, the iPhone 14, a week ahead of the classic mid-September period. Apple packed (and took out) quite a bit in the new iPhones. Here is our impact analysis on the new features and pricing/positioning of the iPhone 14 series.

The NPD Take:

• The inflation-free US iPhone 14: The inflation and its impact on consumer spending continues to be a top-of-mind topic for all businesses as we have been seeing corporations increasing their prices to mirror the increase in costs. Apple, like its rival Samsung who introduced its latest Z Series of foldable smartphones at last year’s price points, kept the iPhone prices unchanged at $799 for the iPhone 14 and $999 for the iPhone 14 Pro. This is good news for US consumers, but that is not the case for Apple enthusiasts elsewhere around the globe as the new iPhone costs, on average, 10% more in most other global markets except China. The price hike in other global markets is driven by the strengthening of the US Dollar against all other major currencies (DXY was up 19% YoY at the day of the announcement.

• Where did the SIM tray go? One of the most controversial announcements on the new iPhone 14 was Apple’s decision to go fully digital on the device activation front by removing the physical SIM tray to enable eSIM activations only. While this move has adverse impacts on smaller MVNOs that have yet to jump on the eSIM activation bandwagon, the majority of US carriers (including the big 3) have already been facilitating eSIM activations for some time. In fact, according to the NPD Connected Intelligence Mobility survey, 48% of US smartphone owners (and 51% of iPhone owners) are aware of eSIM activations. As noted, before, this move is undesirable for smaller MVNOs as well as those international travelers who would rely on foreign operators’ affordable roaming options (thus in need of SIM swaps), but it is time to move on as an industry. Incidentally, the removal of the SIM tray is limited to the US version of the phone; buyers in other regions should continue to enjoy their physical SIMs for another round or two.

• Apple the Lifeguard: There is no question that consumer have been more conscious of their personal health since the early days of the pandemic, and Apple has done a remarkable job of exploiting this trend with the introduction of new capabilities such as the satellite communication feature allowing users send emergency SOS messages in (cellular) dead zones, the car crash detection feature or the body temperature sensors launched on the new iPhones and the Apple Watches. Apple’s genuine efforts in prolonging human life by continuously improving its products and services are highly marketable and should help in enticing the upgraders.

• 6.7” iPhone 14 to cannibalize the Pro Max? While the Pro versions of the iPhone 14 (rightfully) capture the attention spotlight, we need to briefly discuss Apple’s shift in product mix in the affordable range. Last year’s iPhone 13 model launched in two sizes, a mini-5.4” screen version and the regular 6.1” screen version. The new iPhone 14, however, dropped the mini version and added a giant 6.7-inch display version, matching that of the Pro Max form factor. It is important to remember that the Pro Max is out of reach for most iPhone shoppers, thus Apple’s decision to launch a large-screen version of the affordable iPhone 14 is certainly welcome. There should be minimal cannibalization here as the Pro Max version boasts a superior hardware and software spec list (including the impressive Dynamic Island interface that has found a meaningful use case of the top notch hosing the selfie camera and Face ID sensors) over the regular iPhone 14, whose capabilities are hardly different than last year’s model.

• Promo Extravaganza: U.S. carriers continue to be highly motivated in subsidizing the new iPhones as it is the fastest avenue to attract new subscribers while suppressing churn with long-term installment plan programs. All three major carriers have launched similar deals offering the new iPhone 14 Pro (the 128 GB version) for free after trade-in discounts if they sign up for the carriers’ high-end rate plans that come with all the bells and whistles. Incidentally, as the in the previous years, AT&T, which has the highest concentration of iPhone customers in its base, seems to be the most aggressive of all with its trade-in offers that qualifies a three-generation old iPhone 11 Pro Max trade-in eligible for the full $1000 bill credit promotion.

• T-Mobile still not biting the (36-month) bullet: It has been a while since AT&T and Verizon have extended their EIP programs from 24-months to 36-months for their entire smartphone lineup. T-Mobile matched AT&T’s 36-month program when Apple introduced the iPhone 13 series last year, but then reverted to the 24-month payment scheme at the start of the year. Unlike last year, T-Mobile decided not to join the rivals’ 36-month party as it promotes the new iPhones with a 24-month payment scheme. While unlikely (given the inflated cost of financing due to rising interest rates), T-Mobile may consider launching extended financing deals on the Pro Max version like the 36-month EIP deal offered on the Samsung Galaxy Z Fold 4.