There has been a lot of chatter recently about some secondary details Apple (NASDAQ: AAPL) is working out for the next iPhone in terms of pricing and accessories. The grapevine suggests that the next-generation device may come without an important accessory -- a power adapter -- and could also force buyers to invest in aftermarket (and potentially wireless) headphones as the box may be devoid of EarPods.
At the same time, there are rumors of Apple pricing the base model of the alleged iPhone 12 at a mouth-watering $549. These rumors -- if they actually prove true -- have the potential to dictate Apple's financial fortunes once the new iPhone lineup hits store shelves later this year. Let's see how.
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Apple ditching its EarPods and charging adapter shouldn't be a big deal
The rumors of Apple not including a charging adapter or EarPods with the new iPhones were reported by MacRumors based on a Barclays research note obtained by the website. Noted Apple analyst Ming-Chi Kuo had made a similar prediction recently.
Kuo has been known for accurately predicting Apple-related product information, with 9to5Mac calling him the most accurate Apple analyst in the world. So there might be a pinch of truth to the rumors in circulation. But even if they turn out to be true and Apple decides to skimp on these two accessories, investors shouldn't lose sleep for a few reasons.
For one thing, Apple already has a massive iPhone installed base that has plenty of chargers and EarPods from previous purchases. The company reported in January 2019 that its iPhone installed base stood at 900 million. Given that it sold close to 190 million iPhone units last year per third-party estimates, it can be assumed that Apple's iPhone installed base hovers around a billion units. A nice chunk of those users is expected to upgrade their iPhones in the coming cycle, with Wedbush analyst Daniel Ives estimating that 350 million devices are currently in an upgrade window.
Apple can make the next iPhone accessible to a wider audience by pricing the entry-level device at $549, and ditching the two accessories discussed above could help it get closer to that price point. A wired set of EarPods retails for $29 on Apple's website, while an adapter is priced from $19 to $39, depending on wattage. So, Apple could reduce the sticker price of the next iPhone to the tune of $40 to $70 by excluding those two accessories.
The 64GB iPhone 11 is priced at $699. Even if Apple doesn't get to the rumored $549 price point, it could give the next device a nice haircut as far as pricing is concerned and entice the millions that are reportedly waiting to upgrade. More importantly, accessible pricing for its next flagship could help the company get more users into its ecosystem in price-sensitive markets such as India.
Existing Apple users are unlikely to bear the brunt of any such move as they likely already have some form of those two accessories. New iPhone users, however, may feel short-changed, though they do have a plethora of aftermarket options to choose from at competitive prices.
The bottom line is that a lower sticker price for the entry-level iPhone 12 could turn out to be a smart marketing ploy and help drive the tech giant's sales, especially from its huge base of existing users.
Taking a page out of the iPhone 11 playbook
If Apple does release a competitively priced iPhone, a bump in sales cannot be ruled out given how the iPhone 11 performed last year.
The base model of the iPhone 11 was $50 lower than its predecessor. Not surprisingly, the device accounted for 39% of all iPhones sold in the U.S. in the fourth quarter of 2019, according to data from Consumer Intelligence Research Partners (CIRP). What's more, the firm reported that sales of iPhone 11 units with 64GB storage options were on the higher side compared to higher storage tiers, indicating strong demand for the cheaper variants.
So, don't be surprised to see Apple hammer out an attractive price point once again this time, even if it requires the company to skimp on a couple of accessories that its existing users should ideally already have.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.
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