The market is running abuzz with news that Apple will discontinue iPhone X.
“The simple problem with X is that it is too expensive,” Neil Campling, the co-head of the global thematic group focusing on technology at Mirabaud Securities told CNBC, talking about the device’s $999 price tag.
“Consumers are turning their backs on high-priced smartphones.” He clarified that any old inventory of iPhone X models will still be on sale, but no new ones will be produced. – CNBC
There are plenty of theories doing its rounds on why the Tim Cook led company would take the extreme step and then there are a few reasons why I think it will never happen.
X Factor No 1:
Apple is sitting on a pile of cash. Well, actually its a mountain pile of cash. At the end of second quarter (2018), Apple was sitting pretty on top of $266 billion. Apple can buy as many companies as it wants with that kind of money. So, why discontinue a product and accept to the whole world that your product positioning and pricing went horribly wrong?
X Factor No 2:
If you take a closer look at the automobile industry, there are plenty of companies building high end, high performance products also known as grossly over priced cars.
These products hardly sell, but why do BMW, Mercedes Benz and the likes even build them? They know that there will be no volume, which means there will be very little money to be made.
The reason is two fold. It’s marketing and branding. By building an ultra premium product way out of reach for a majority of customers, companies can further strengthen the aura of a premium brand.
How many times have you drooled over a high end sports car in the parking lot.
I have. Plenty of times. We know we will never buy them, but still we were ready to take a closer look and admire it. Call it marketing, if you want to.
So why can’t Apple position iPhone X as an ultra premium, over expensive product that only a few customers buy. There is plenty of margin anyway.
X Factor 3
Apple is a public company. Believe it or not, Wall Street will not be happy if iPhone X is discontinued. Because, its an open admission by Apple that it has got its strategy wrong with iPhone X. Why invite trouble and take a hit on company valuation, while you can just cut down on production capacity and get away with it.
My 2 Cents:
Apple of-course overestimated the demand for iPhone X. So production will have to be cut to clear inventory and match future demand. But…
Apple has plenty of reasons, time and cash on hand to further double down on iPhone X. I wouldn’t be surprised if Apple decides to hold its current (over the top) pricing for iPhone X and pack more features into it.
Keep increasing the value of the product until it justifies the pricing.
