Ever since the release of the iPhone 7, there's been near-constant speculation about what Apple (AAPL) has in store for the next edition of its flagship smartphone model.
Most of the leaks predict the 10th anniversary iPhone will feature a rich organic LED screen, wireless charging and some form of augmented reality technology. But all those fancy new features are likely to come with a hefty price tag, with several analysts saying the iPhone 8 could cost as much as $1,000, and others arguing it will be more in the $850 to $900 range.
It's unlikely that Apple would release just one model at a single price point, however. Last year, Apple released the iPhone 7 and 7 Plus with starting prices of $649 and $769, respectively, as a way of catering to both middle market and high-end consumers, and will likely do the same with the iPhone 8. Some analysts have argued that Apple will restrict the OLED screen to just the most expensive, top-tier iPhone model due to supply constraints, and simultaneously release two smaller-sized models using the traditional LED screens that wouldn't exceed $750.
Apple seems to be committed to including OLED technology in some, if not all, of its upcoming models, which means the iPhone 8's average selling price will likely be higher than the $645 ASP it recorded last year.
"I believe the goal is to eventually move all models to OLED once they can get a steady supply of OLED screens over the next few years," said Tim Bajarin, president of research firm Creative Strategies. "Supply will be the big obstacle to making these available on all models as well as the price Apple pays for OLED screens."
Apple's current premium-tier iPhone model, the 7 Plus, starts at $769 with 32 GB of memory, but goes up as high as $969 for 256 gigabytes, meaning a $1,000 iPhone might not be too much of a jump for the tech giant to make. That said, UBS analyst Steven Milunovich said he believes Apple will try to price the iPhone 8 between $850 and $900, representing a slight premium to the Samsung Galaxy S8 and S8+, which start at $720 and $840, respectively. Both of the new Galaxy models feature OLED screens.
Editors' pick: Originally published April 7.
Apple prefers to price its products competitively, and so probably won't "stray far" from Samsung's highest price point, Milunovich added.
"Apple is about mainstream luxury, so a $1,000 phone seems less likely," Milunovich wrote in a recent note. "The company likes to position its entry-level products at the mid-market with 'Pro/Plus' products close to competitors at the high end."
If Apple does end up releasing a $1,000 iPhone 8 model, it would be one of the few cases where Apple releases an ultra-luxury device. Apple's best-known attempt at entering that market was when it released the 18-karat gold Apple Watch Edition, which cost as much as $17,000 but has since been discontinued. Although they represent a much smaller faction of Apple's consumer base, there are a sizable number of shoppers who would go for a $1,000 iPhone, said Bob O'Donnell, chief analyst at Technalysis Research.
"It's the perfect time for them to release a luxury phone with it being the 10th anniversary," O'Donnell added. "There's a real legitimate market opportunity and it'll add some exclusiveness back to the brand."
Even though Apple has historically raised the average selling price of many of its products (such as the Mac) year after year, it has still maintained strong consumer demand. Milunovich expects that trend to carry over into the latest iteration of the iPhone, and estimates that the high-end OLED model will represent 45% of its total iPhone 8 shipments.
"Consumers are not necessarily against paying more for hardware in the name of design and performance," he added.
Bajarin said he doesn't think Apple will need to price its highest-end iPhone at $1,000. Only "power users" would be interested in such a phone and while the OLED technology costs more, Apple buys in such huge volumes from its suppliers that they'll most likely be able to keep their mainstream models below $1,000, Bajarin noted.
Analysts have also debated whether or not a higher ASP for iPhones would help or hurt Apple's presence in international markets. In the past few years, Apple has focused more on lower-end smartphone models as a means of penetrating regions with lower average incomes, including India and China. But China's middle class has been growing and a significant number of Chinese consumers favor the Apple brand over local smartphone makers like Huawei, Oppo or Vivo, due to its seeming luxury status and design.
FBN Securities analyst Shebly Seyrafi believes, however, that the Greater China region could be a "lost cause" for Apple if it releases an iPhone costing $1,000 or more.
"The great majority of Chinese will not pay this amount, and I believe that the high price point could be a hindrance to the majority," Seyrafi said. "The local brands are doing very well against Apple in China and I think that this momentum persists."
3D sensing technology used to power augmented reality applications could be the factor that tips the price point above $1,000, Seyrafi added. Touch module manufacturers TPK Holding and General Interface Solution are rumored to be supplying the technology for Apple and recently said they will be charging 60% more for OLED-equipped touch modules, according to Fortune.
But even if the cost of the next iPhone is priced near or above $1,000 a pop, consumers might not actually notice, given the number of smartphone buyers who purchase phones on some kind of installment plan from their smartphone carrier.
"Many could be put on installment plans, so that they don't 'feel' the cost so much," Seyrafi noted.