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Why iPhones Are Getting So Expensive

Why iPhones Are Getting So Expensive

Hey guys, it’s Greg with Apple Explained. And today we’re going to discuss why iPhones
have been getting so expensive, especially in the last few years. This topic was the first place winner of last
week’s voting poll, and if you didn’t get to vote, make sure you’re subscribed. That way the voting polls will show up right
in your mobile activity feed and you can let me know which video you’d like to see next. So if you’ve been following iPhones for
a while, you may’ve noticed a trend. Because back in 2012, the brand new iPhone
5 started at $200. While today, the current flagship iPhone starts
at $1,000. So what happened in the last few years that
made iPhones costs $800 more than they did just six years ago? Well we’re going to dig into the numbers
now and find out. So for the sake of this video, we’re going
to be comparing the base model flagship iPhone 5 released back in 2012, and the 64GB iPhone
X from 2017. I chose last year’s model just because it’s
close enough to this year’s iPhone XS, but there’s more data on sales, materials, components,
and a year’s worth of insight on how the phone is manufactured. Now the iPhone 5 had an advertised price tag
of $199 while the iPhone X had an advertised price of $999. Now why do I say “advertised”? Well back in 2012, you might remember the
most popular way people paid for phones were through two year contracts offered by their
carrier. You put down, in the case of the iPhone 5,
$200 at the time of purchase, and somewhere between $25 to $30 a month for two years. Nowadays, two year contracts are pretty rare. Most people are on annual upgrade programs,
where you pay something like fifty dollars a month for as long as you keep the phone. But there has always been another way to buy
an iPhone. And that is paying for it upfront, in full. And that means you aren’t tied to a carrier
through a contract, and all you have to pay for is your phones service, eliminating monthly
phone payments. Now this method of buying iPhones has become
more popular in recent years since Apple stopped advertising the two-year contract price in
2015 and instead displayed the phone’s full price when buying outright. So in order to compare the cost of both iPhones
in a fair way, we have to use their unsubsidized price. Which was $649 for the iPhone 5 in 2012 and
$999 for the X in 2017. Now that’s still a big $350 price difference,
so where is that extra cost coming from? The easiest and most cut-and-dry answer is
that the components include in the iPhone X cost more, which raises its manufacturing
price. But it goes even further than just the internal
components. Because almost every single material used
on the exterior of the iPhone X was inherently more expensive than the materials used in
the iPhone 5. For example, the back of the iPhone X is made
from super strong glass instead of aluminum, the sides are stainless steel instead of aluminum,
the display is a much larger, more advanced, and more expensive OLED panel instead of the
fairly standard LED LCD used in the 5, and there’s twice as many rear camera sensors. But these materials account for just a fraction
of what makes the iPhone X more expensive. You see, it used to cost Apple $207 to manufacture
each 16GB iPhone 5 according to a September 2012 report by IHS iSuppli. Comparatively, the iPhone X cost Apple $370
per unit. Which is an almost 80% increase in cost. And that isn’t even considering the research
and development costs behind the iPhone X’s pioneering technology like the TrueDepth sensor. So let me break down the cost of the iPhone
X’s components, from most to least expensive, and it all begins with the $110 Samsung OLED
display fused to a 3D Touch glass panel. And this is by far the priciest component
of the iPhone X. Almost double the next most expensive, which
is the glass and stainless steel chassis. Next is the rear camera system coming in it
$35 per unit, then the storage and RAM which costs about $33, the A11 Bionic System on
a Chip which is $27, and finally one of the most affordable components on the iPhone X,
which might come as a surprise, is the TrueDepth sensor array at $17. Now the remaining $87 goes to other small
components like packaging, accessories, various sensors, and power conductors. And when you factor in everything else that
it takes to get an iPhone from the drawing board to a finished product, Apple collects
a gross profit margin of 64 percent. So now you may be thinking, why is Apple including
higher priced components in iPhones if it makes them so much more expensive? Well a major reason why is because sales figures
have proven that customers are willing to pay premium prices for premium technology. And before you accuse Apple of just trying
to get as much money out of their customers as possible, consider the iPhone SE. Perhaps the best budget smartphone ever made. And certainly a much better value than previous
budget iPhone models like the 5C. Because the iPhone SE had the latest processor,
antennas, and camera system with a display and design that was tried and true for customers
and inexpensive for Apple to manufacture. So with the iPhone SE, customers ended up
with a modern smartphone with modern technology at the time for just $349. Probably the best dollar-for-dollar value
of any smartphone ever. But there was one problem, it just didn’t
sell well. Compare that to the $999 iPhone X which sold
extremely well. Now what does this mean? Well the obvious conclusion is that the vast
majority customers are willing to pay premium prices for a premium device. And this market behavior still holds true
today, since the more affordable iPhone XS was outsold by the XS Max by up to four times
according to Ming-Chi Kuo, suggesting that consumers are far more interested in a device
with a form factor that’s dramatically improved over its predecessor. And another major reason why Apple is able
to charge higher prices for iPhones is because customers are able to hold on to their devices
for longer. I mean, the iPhone 6s is still a high performing
device almost four years after its release and it just received its third major iOS update,
which actually made it even faster. And considering iOS 12 supports iPhones from
five years ago. An iPhone X purchased in 2017 should last
until 2022. And I don’t think that’s something many
people could say about their iPhone 4. And Apple is actually trying to encourage
users to keep their iPhones longer. If you watch their iPhone XS event, you probably
saw Lisa Jackson, the environmental director of Apple, taking the stage and saying that
if you’re still satisfied with your iPhone, you should keep it since it’ll help reduce
your environmental footprint. This could also be why Apple invested so many
resources into ensuring iOS 12 would actually make older iPhones run faster, something that
can’t really be said about any other iOS version. But one of the most important points I want
to make in this video is that Apple isn’t the only company creating premium-priced smartphones. In 2017, the iPhone X received a huge amount
of criticism for it’s $999 price tag, but at the same time the Samsung Galaxy Note 8
was being sold for $950. So it actually wasn’t even Apple who created
the premium smartphone space, they simply made their own model to compete. And today, the Galaxy Note 9 costs more than
any previous Samsung phone, starting at $1,000. So if Apple had skimped out on any of the
iPhone X’s features in order to make its price a little bit more affordable, they would
have lost a competitive edge and lost customers by not being competitive and creating the
most powerful, feature-filled device technology would allow. And considering the iPhone X’s sales success,
it would appear that Apple definitely made the right decision. Now I should mention that the iPhone X wasn’t
the only model Apple offered. It just happened to be the most expensive. Along with the iPhone X, Apple sold the iPhone
8 for $699, 8 Plus for $799, iPhone 7 for $549, iPhone 6s for $449, and iPhone SE for
$349. And the bestseller out of the entire 2017
iPhone lineup, was the $999 iPhone X. Which proves the point that most customers
are willing to pay more for a device that adds extra value to their lives. Now what can we expect iPhone pricing to look
like in the future? Well we can probably expect the price of components
to decrease, since Apple recently invested millions into LG, in order to accelerate development
of their OLED production facility so Samsung won’t be the sole supplier of iPhone displays. This’ll give Samsung some competition and
an incentive to lower their prices, which will likely lower the production cost of future
iPhones. Also, if the iPhone XR is indicative of the
future of cameras and 3D Touch for the iPhone line, we might see the amount of rear cameras
go back down from two to one, as well as the addition of haptic touch in flagship iPhones
to replace 3D Touch, which is a notoriously expensive technology to manufacture, test,
and repair if the fragile 3D touch component breaks. Now this next part may sound a bit crazy,
but as Liquid Retina Display technology continues to develop, it might become advanced enough
to replace OLED displays in iPhones. Since LCDs are theoretically less expensive
technology to manufacture, plus it doesn’t cause eye strain like OLEDs do for some people
due to its light flicker. Also, if Apple achieves their goal of producing
iPhones using 100% recycled materials, that’ll eliminate the need to purchase raw mineral
materials. This’ll not only reduce Apple’s carbon
footprint, but further reduce the price of Apple devices since the product lifecycle
would become a closed loop. So all together, if you’re willing to pay
a higher price tag for a much nicer device every three or four years, Apple’s ready
to charge you for three to four years of value and usage, which I think ultimately is a better
deal for both Apple, and you, the customer. So that is why iPhones are getting more expensive,
and if you want to vote for the next video topic, don’t forget to subscribe. Thanks for watching, and I’ll see you next

79 thoughts on “Why iPhones Are Getting So Expensive”

  1. Its because iPhones last longer. Tell me, how many people use samsung galaxy s6 compared to iphone 6s. Both released in 2015. My comment might be ignored since dumb people hate the truth.

  2. Liked this video and Subscribed <3! You are one of the few YouTubers who mentioned eye strain and light flicker, appreciate that.

  3. 10:06 liquid retina displays are regular LCD's that are just re-branded to sound fancy. $750 for a 5 year old 720p display? Gtfoh!!! I'm sorry but that is a scam, anyway you look at it, atleast the iphone Xs, and Xs Max have a nice oled screens so they still might be worth it, for those who have the money and are considering an upgrade. Even cheap andriod phones have 1080p AMOLED displays that are gorgeous for far less. I'm not a fanboy, but this is just a fact. 1080p displays are an industry standard. The Xr is almost identical to the iphone 5c. It has none of the same appeal of the flagships, however its price is way to high. It's just a horrible horrible value proposition.

  4. I purchased two iPhone 6S Pluses (128 GB each), an iPhone 6S (128 GB)and an iPhone 7 Plus (256 GB) at wholesale prices during a recent holiday shopping spree and saved a significant amount of money instead of buying the most recent iPhone models at retail price.

  5. Actually, if you adjust it for inflation as well, the 2012 phone cost is $692 so it’s $200 in difference for SO much that the 2017 phone is offering

  6. if iphone Xs cost 999 dollar i would buy it, but you should add like 400+ dollar to that because thats the price they costs in sweden so stop crying about it being "expensive" since americans doesnt know what expensive is…
    Edit : Iphone 8, 64GB costs 800 dollar at retail price as of 2018-12-29

  7. I have friends who are still using iPhone 5s and they run perfectly smooth and much better than some new model androids, I'm not even gonna talk about phones that came out around the time the 5s did simply because none of them lasted more than a year.

  8. The main reason has to be sought in a combination of psycho-social factors and financial offer: most of Iphone customers are middle-class people who look for social standing, owning an Iphone gives you the impression of being part of elite (just like drinking a 50$ French wine; phenomenon of social imitation of upper class, "I wanna be part of the bourgeoisie"). Access to premium/high-end products is being eased through financial credits…just have a look around you, more than 95% of new cars are sold this way. Real rich and upper class people look for needs-responding, quality and long-lasting products. They usually keep very long the products, and in some case, give them to their children, e.g. brands like Burberry, Hermès, Rolex, Mercedes, Zegna, Cerutti… originally issued extremely high quality products…In most western cities, a lot of rich people have even no more cars…they use cabs/Uber…

  9. Fun fact: The reason the screen is so expensive isn’t because it’s oled. You see, almost every single other phone has some kind of chin bezzel on the bottom, even small but it’s there. Apple though doesn’t have one.

    There is a connector at the bottom of the screen to connect to the motherboard which cannot be bent forcing you to have a chin.
    But Apple extended the screen and bent it over it self and then put the connector so there is a part of the screen which oh cannot make.
    This costs a lot of money which is why other manufactures don’t do it

  10. After some decade $10000 k dollar iPhone will come still Tim Cook will release it !!!!! People complain but keeps on buying


  12. And in the end it's still just a freaking phone to make phone calls. There are a lot of phones out there today that do great, Apple still pricing like they are the only game in town.

  13. I still buy my phones on the payment plan by my carrier. The difference is that the carrier now tells me the full price and the monthly payment so my only contract is the financing on the phone. Once that is paid off, I can cancel my service so if I get it half way paid off and want to cancel the contract, I just have to pay what I owe. They used to hide that cost and require a two year contract with an exorbitant fee to cancel. Then they would charge you whatever they think they could get you to pay as the monthly payment so you were still paying for the phone, it just was not clear how much you were paying. I like the new way better.

  14. The points here are stupid… why does someone spend 100k on a Mercedes Benz when a $30k Camry will do? It's called choice! You don't need to justify it to anyone. I rest my case.

  15. I live apple products but like tf bruh they are overpriced and that doesn't have to do with what makes up the phone because right now a Samsung s8 is cheaper than the iPhone 8/8plus and both are glass and the s8 has face recognition so isn't it Samsung should be upping their price the consumers need to talk and stop buying buying and emptying bank account just on a phone. Be wise….

  16. Looks like no more Apple products for me I refuse to over pay for a product no matter how good they are….

  17. Iphone xs is 2000$ in my country.. in your video says iphone x bestseller because it was expensive.. i dont agree its bestseller because it is a really good product and ofcourse comes with a premium price..

  18. Honestly the biggest bull I ever heard, because a lot of people have iPhones, and people are willing to pay for the newest iPhone, apple made a smart move by making and selling new iPhones every year, why time by time makes the price higher and higher and yes the note 10 was selling at 1000, it didn’t matter because even if the note 10 wasn’t being sold at 1000, apple would have still sold the iPhone X at 1000 since the iPhone 8 was around 300 dollars less, apple sells their phones every high, it’s not because of “expensive” materials or Samsung’s prices, it’s because their selling iPhones YEARLY!! Also I can’t even understand when he said “ if the iPhones XR camera keeps getting better, that might decrease the iPhone cameras to 2 to 1” literally apple would never do that, with a second camera it’d makes iPhone camera system seem more advanced and modern, which could help Samsung users switch to iPhone, literally your the WORST when it comes to business, get your brain 🧠 before you act so smart! You see 😂😂😂

  19. Well apple are all about money and profit, they are a lazy company that just rehashes the same crap over and over again whilst charging extortionate prices to get their 65% profit margin. The millions of iPads and iPhones etc… they sell they could easily sell their products for a 15% profit margin. They’d sell more and still be making billions in profit. Cuz they’re so expensive they are losing customers like me, my 3 sisters, 4 of my mates have switched to android devices all because they are not willing to pay 3-400 bucks more for the same old shit, half the new shit they add to these new phones are pointless and prob never used most of the time, they need to change the layout of the phone or make it possible to personalise the layout like android do. They need to add sd slots for memory expansion and reinstate the headphone socket. Apple are just boring now, without Steve jobs the innovative ideas have dried up like a puddle in the Sahara. Proof that he was actually a genius idea guy as it’s so evident now. I haven’t seen a new model since the 6s that has pulled me in and made me want to part with 2 weeks wages for nothing new.

  20. Nobody bitches when people buy a Rolex or a Patek Phillipe, even though they all do the same basic thing; tell time yet when it comes to multi functional tools like Iphones where you can edit documents, record videos, take pics, video call, make transactions, play games etc for only $999, people complain. If you’re too broke then don’t buy but also don’t complain. Android is waiting for you’re business and there’s markets open for all sorts of products. It’s not that Apple are marketing geniuses, it’s that people are emotionally unstable.

  21. Tbh I feel like iPhones have been getting expensive because they add more details to the phone every other year, so basically what I’m trying to say is the designs and details change so apple makes it more expensive. For the oldest generations apple slows them down that’s when people start upgrading to newer iPhones. Well yes apple makes the newer phones because the design is changing to hard glass, but is it worth your money for the next day for it to break? No but since it’s a cool design people would keep on buying newer phones. So every other year apple will keep making iPhones expensive 😐👌

  22. "Never assume the world's most profitable company is bad with money"
    -Polymatter in his video titled 'Apple's Money Problem (& Why It Won't Buy Netflix)'

  23. Note: iphone xs doesnt sell well compared to iphone xs max.because it has lower battery power than previous model iphone x.why did you reduce battery that one of your strategy to sell iphone xs max more?customers are not will lose to huawei if you fool around like that.

  24. Get an iPhone X for 370 bucks, just buy the parts or order them from Shenzhen China then assemble it from yt

  25. Well, ok. I am poor. But even if I was King of Japan I wouldnt buy hideous notched bulky phones (or ones with punch holes), no headphone jack, no dash charge. Apple in general and even Samsung is not appealing to me, atleast.

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