For most of the iPhone's history, Apple (NASDAQ: AAPL) has offered three different tiers of iPhones. The latest and greatest always occupied the high-end price point, with the previous generation at the mid-tier price point, and the generation before that at the low-end price point. With every new product launch, the models would cascade down a notch.
That strategy sort of changed in 2016 when Apple introduced the iPhone SE, which represented a major strategic shift for the company. The SE was notable because Apple included then-current specs like the A9 processor into a recycled form factor but offered the device at an incredibly aggressive price (originally $399), creating its most affordable tier.
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Yet with the introduction of three new models this year, including an even higher tier at $999 for the iPhone X, the lineup is getting overcrowded.
The most iPhones Apple has ever offered
Apple dropped the iPhone SE price by $50 this week to $349, the lowest price it has ever offered an iPhone for. This is the current lineup, which is the most expansive lineup Apple has ever had, spanning a wide range of prices from $349 for a base iPhone SE to $1,149 for a maxed-out iPhone X.
There seems to be something for everyone, but if you look specifically at the iPhone 6s through iPhone 8, the value proposition of each successively higher tier becomes questionable. Years ago, each new iPhone would typically launch with some new headline selling feature where Apple would focus its marketing efforts. Features like Siri in the iPhone 4s, Touch ID in the iPhone 5s, larger displays starting with the iPhone 6 and 6 Plus, or 3D Touch in the iPhone 6s.
But more recently, the new updates have become increasingly incremental, which has led to a somewhat justifiable perception that the pace of innovation is slowing and that we're approaching "peak smartphone." It goes without saying that performance improves every year across the board in areas like processor or camera performance, but as far as entirely new features and technologies, recent additions don't move the needle very much.
The iPhone X does raise the bar with a new OLED display and TrueDepth camera system -- which Apple hopes will justify the $999 price tag -- and iPhone SE leads Apple's low-cost iPhone strategy. CEO Tim Cook recently said, "The approach we've had from a product point of view, of bifurcating iPad and iPad Pro, is really resonating with our users." It makes sense to use this strategy with iPhone, as embodied by iPhone X and iPhone SE.
However, there's very little differentiation in the middle of the spectrum. Within the same display sizes, what do you get from an iPhone 7 over the iPhone 6s for the extra $100? Very little beyond modest spec bumps, unless you consider removing the headphone jack a "feature" (which is why I didn't upgrade for the first time in eight years.) What about moving from iPhone 7 to iPhone 8 for $100? The biggest difference is wireless charging, but Apple hasn't even provided technical details about which Qi standard and charging rate it is using (reports suggest Apple is using an older, slower version).
See for yourself with Apple's comparison tool. The iPhone 8 hardly warrants its $250 -- or 55%! -- premium over the iPhone 6s, and that's a problem. If the value proposition of each higher tier is questionable, why is Apple offering so many of them?
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