Apple inflation: iPhone, iPad, and Mac prices all surge amid new launches

Apple has pricing power and appears to be using it as prices go higher with every product launch in 2018. Will tech buyers push back?
Written by Larry Dignan, Contributor

In the past two months, Apple has launched the iPhone XS, iPhone XS Max, iPhone XR, iPad Pro, Mac mini, and MacBook Air. The common thread? Apple is testing how much it can raise prices -- and the prospect has Wall Street analysts salivating. Tech buyers may not be so happy.

Must read: Apple's new iPad Pro, MacBook Air, and Mac mini: Can features, specs retain business momentum?

If we've learned anything about Apple in recent months and years, it's that the company has pricing power. While Samsung customers may choke on higher prices and push the company into more of a value-oriented pitch, Apple remains the luxury device maker.

We're about to find out just how far Apple can push price increases. To be fair, commodity costs have risen, and China tariffs are going to hit at some point. In many ways, Apple is just part of a broader inflation trend in the US economy. In other words, Apple isn't the only company looking to raise prices to preserve margins.

Another point to ponder is that Apple has raised premium device prices, but offered other devices like the iPhone XR to appeal to those of us that don't want to go higher than $1,000 for a phone.

So far so good for Apple. The company reported strong fourth quarter results and wound up with an average iPhone selling price of $793, up from $618 in the same quarter a year ago. Apple beats Q4 expectations, posts record Services revenue

CEO Tim Cook said:

It was a big year and a big quarter for iPhone. Q4 revenue was up 29% over last year, an increase of over $8 billion to a new September quarter record, fueled by continued momentum for iPhone 8, 8 Plus and X and the very successful launch of iPhone XS and iPhone XS Max.

Are Apple prices justified? Think the iPhone is expensive? The iPad Pro has it beat | Apple's storage pricing oddities | Your old $99 Apple Pencil is now junk | iPhone XS Max: How much profit does Apple really make on each one sold? | iPhone XS Max teardown: Here's what $1,249 flagship costs Apple in parts | Apple's iPhone XS Max price tops out at $1,449 -- and 8 other keynote takeaways | Apple 15-inch MacBook Pro (2018): Impressive performance at a premium price

Nevertheless, Apple's higher prices are hard to miss. Jefferies analyst Timothy O'Shea outlined the price increases following the iPad Pro and MacBook Air launch. He could hardly contain himself over the prospect of higher average selling prices boosting revenue.

O'Shea outlined what many of you are finding out as you configure Apple devices:

Hardware prices continue to rise across product lines. Starting at $799, the new 11-inch iPad Pro is 23 percent more expensive than the previous model's $649. Starting at $1,199, the new MacBook Air is 20 percent more expensive than the previous model's $999. And starting at $799, the new Mac Mini is a whopping 60 percent more expensive than its predecessor at $499. iPhone prices have risen 13 percent and 19 percent during the last two years.

O'Shea also noted that Apple has "clear pricing power in the near term" and is "clearly flexing its muscle here." The other wrinkle here is that accessory prices are going higher, too. The Apple Pencil costs $129, or 30 percent more than the first gen. The Smart Keyboard Folio starts at $179, 13 percent more than the older version. "Bottom line, after you spend 23 percent more for this year's iPad Pro, you also spend more on pricier accessories," he said in a research note.

Also: Best Apple iPad Pro alternatives you can buy right now

It's a nice gig, if you can get it. In technology, Apple is one of a few companies that can maintain pricing power. Analysts aren't going crazy raising their revenue projections for Apple, but they are likely to as soon as the company reports earnings on Thursday.

Apple reported fourth quarter earnings per diluted share of $2.91, up 41 percent year-over-year. Revenue came to $62.9 billion, an increase of 20 percent from the year-ago quarter. Wall Street was expecting earnings of $2.78 per share on revenue of $61.57 billion.

For fiscal 2018, Apple delivered net income of $59.5 billion, or $11.91 a share, on revenue of $265.6 billion.


Here's a look at Apple's historical as well as projections ahead of the fourth quarter results via Thomson Reuters.


Apple's financials -- historical and estimated. (Source: Thomson Reuters)

Scenes from Apple's iPad Pro and Mac event

Related stories:

Editorial standards