How Apple can raise iPhone prices and please consumers and investors at the same time.

Rolfe Winkler and Jang Lie from WSJ (News+ link via DaringFireball):

Apple is weighing price increases for its fall iPhone lineup, a step it is seeking to couple with new features and design changes, according to people familiar with the matter.

The company is determined to avoid any scenario in which it appears to attribute price increases to U.S. tariffs on goods from China, where most Apple devices are assembled, the people said. […]

The people familiar with the supply chain said Apple would have trouble making up for China tariff costs solely by seeking further savings from its suppliers, meaning that a hit to its profit margin was likely unless it could raise prices. […]

These circumstances have led Apple to look at what supply-chain insiders described as the least-bad choice: raising prices on the new iPhones to preserve profit and finding reasons other than tariffs to explain the move. It couldn’t be determined what new features Apple may offer to help justify price increases.

New features alone won’t be enough to justify a higher price. Apple has been improving the iPhone each year and hasn’t raised the $999 ceiling ever since the debut of the iPhone X in 2017. If they add new features and raise the price, it will signal tariffs to most people.

There is one move though, that could please investors, consumers, and even Apple’s marketing team to lower the tariff burden.

What if Apple just bumped the base storage of newer iPhones to 256GB at the same $100 cost? Technically they would be raising prices by eliminating the base storage, but at least you’re getting 256GB in return. The average consumer would also be accepting of this price increase because it is tariff season after all, and everything is supposed to go up in price. Heck, it might even feel like a deal since everyone else is giving you the same product at a higher cost. At least Apple is kind enough to “give you” an extra 128GB of storage.

Paying an extra $100 for something that costs Apple probably a few bucks extra is also going to put a smile on investors’ faces since those memory chips are pennies on the dollar for Apple, helping Apple keep a higher profit margin per iPhone sold. This increased pricing also has some cascading effects on older iPhones which I talk about below, that further quenches Wall Street’s thirst for growth. Remember, these increases will be worldwide, so the effect will be compounded.

The marketing team could easily help with Apple’s keynote, where the presenters (Kaiann and Joz) could market the new pricing, “which also matches last year’s price with this level of storage.”

Here’s how the pricing would look for the 256GB models:

1. iPhone 17 Pro Max - $1,199

2. iPhone 17 Pro - $1,099

3. iPhone 17 Air - $999

4. iPhone 17 - $899

Phones that still start at 128GB:

1. iPhone 16 - $799

2. iPhone 16e - $599

A few notes to consider:

1. The 15 and 16 Pro Max already start at $1,199 with 256GB of storage, so Apple would leave the 17 Pro Max unchanged.

2. The 256GB iPhone 17 Air at $999 is equal to the 256GB 16 Plus in price, so the pricing strategy still works since the 17 Air is the replacement for the Plus model.

3. The iPhone 17’s new base price of $899 allows the iPhone 16 to keep its $799 price for another year, similar to the Apple Watch Ultra 2 and not take a $100 discount, keeping it at a higher margin. Dropping the iPhone 16 to $699 will also cannibalize the 16e market.