One day after the most anticipated Apple product launch in 10 years, several problems have emerged for the much hyped iPhone X, face-recognition demo flop notwithstanding: it will be substantially delayed confirming all earlier reports of supply-chain bottlenecks, and it will be expensive, perhaps prohibitively so. The introductory prices of the iPhone 8 and the iPhone 8 Plus have gone up compared to the prices of the iPhone 7 and the iPhone 7 Plus. The iPhone X, meanwhile, will price in the 4 digits well equipped. Addressing this issue, the WSJ has a front page article titled "Apple’s New iPhones Gamble on Allure of Premium Pricing."
In one place that gamble may prove insurmountable. As India Today writes, when it goes on sale in India on November 3, the iPhone X will cost Rs 89,000 for the 64GB version. The top-end variant with 256GB is going to cost Rs 102,000. "In other words, this is one expensive phone, although you can say that the iPhone has always been expensive."
To demonstrate just how expensive, on a purchase price parity basis, the iPhone X will be in India, India Today writes that "the other thing that you can say about the iPhone X is that it is cheaper in some other places. As it always happens, the market where the iPhone X is going to be the cheapest is probably Hong Kong."
In fact, the iPhone X is so expensive in India, and so cheap in Hong Kong, that you can go Hong Kong, buy the phone, and come back and yet save some money. And this includes the cost of flight ticket to Hong Kong. Just see the math."
iPhone X (256GB) in India: Rs 102,000
iPhone X (256GB) in Hong Kong: Hong Kong Dollar 9,888. This means using the current exchange rate, in Indian currency the price is Rs 80,999.
What does this mean? It is cheaper to go to Hong Kong and buy the iPhone X 256Gb variant there.
The iPhone X will be available from November 3. Now, if you book your flight to Hong Kong today, the cheapest flight in the first week of November that you can book from Indian will cost around Rs 20,000. If you book a flight from Kolkata, you can get a return ticket to Hong Kong for little over rs 17,000. From Bangalore it is around Rs 19,000. From Delhi, around Rs 20,000. From Mumbai it is a little more expensive.
Flight ticket: Air Asia Rs 17,800
iPhone X 256GB: 80,999
Some other expenses: Around Rs 2000 to Rs 3000
Total: Around Rs 1 lakh
Money saved: Around Rs 2000
The report's conclusion:
Now, we know the whole thing sounds like a joke. And in a way it is. No one is going to go specifically to Hong Kong from India to buy the iPhone. Also, it works best with the 256GB variant. But it does show the ridiculousness of the iPhone prices. and particularly the iPhone X prices, in India. Is it because Apple can't price the iPhone any cheaper? Is it because Apple wants big profit margins? Is it because of Indian government taxes? Is it because Apple wants to keep the iPhone prices high so that it continues to a status symbol in India? We don't know. Only Apple can answer these questions, if it wishes to answer them.
For now Apple is ignoring these, and various other pressing questions - including the whole animated poop emoji. Overnight Doug Kass released the following assessment of why this time Apple may have gone too far:
Apple continues to deliver an expensive smartphone relative to its peers, with many features that are already available from its competition and most of which were anticipated, including face recognition, a full-screen interface and no home button.
The only exception to reality versus anticipation was the later-than-expected availability, which is toward the end of the year (orders will be accepted on Oct. 27 and deliveries are slated for Nov. 3). As a result, analysts could take 3 million to 4 million iPhones out of their December quarter projections and reduce full-year 2018 estimates by about $0.40 a share.
However, the new Apple phone will provide an animated poop emoji so you can talk crap to your friends.
The starting price for the 64GB model of the iPhone X is $999 and $1,149 for the 256GB model. The Apple smartphone continues to be a high-priced aspirational product accompanied by a remarkably effective marketing effort that is stretching its status symbol appeal. However, I see little incremental to the latest product offerings, leaving room for disappointment relative to optimistic expectations. (It is why I initiated an Apple put position yesterday morning and added to that position when the stock was up $2 early in the afternoon).
The expectations of an Apple replacement super-cycle accompanied by higher unit volumes and much higher average selling prices, leading to expectations of a "hockey stick" of earnings growth in the coming fiscal year coupled with a general confidence in sustainable growth from there, have spurred a rise of more than 50% in Apple's one-year forward price/earnings multiple in the last 1 1/2 years.
I clearly have underestimated the strength of and the confidence in the Apple franchise over the last year. Recognition of this has led me to maintain more of a trading-oriented short position, whereas years ago I had more of an investment short position, which proved successful. Nevertheless, I continue to believe that these aggressive "going forward" expectations for Apple and the company's current valuation remain too ambitious.
But the biggest threat facing the iPhone and perhaps the entire Apple business model, is if its products are no longer perceived as the pinnacle of "coolness." And while it is too early to conclude either way, following yesterday's disappointing and badly leaked release, many appear to be taking aim at Apple not as the source of brilliant Steve Jobsian innovation and "hipness", but as the target of mockery, scorn and humor. Indeed, as one readers suggested, "The bloom may be coming off the rose. Even folks in the twittersphere piling on. In the past there was such a halo around apple, nobody would make fun of them. Now it seems the opposite."
Iis the idol worship coming to an end? According to these widely publicized reactions to the iPhone release, the answer appears to be yes.
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