iPhone Pricing and Inflation

I thought this analysis by Wally Nowinski, of PerfectRec, was intriguing, but perhaps not completely convincing. Nowinski says the most recent batch of iPhones are, with the exception of the Pro Max, the “most affordable” iPhones since the product’s launch, when adjusting for inflation, and has the figures to prove it. The data is sound. The point of this is what I did not find as compelling.

For a start, it is purportedly a price comparison of unlocked iPhone models in the United States, which immediately makes it less relevant to me. But it is worth noting that Apple did not sell unlocked iPhones in the U.S. until the iPhone 4 in June 2011 — just before the launch of the iPhone 4S — and that the original iPhone was $499 but only worked with AT&T when it came out.

A brief aside, as we are discussing the historical value of unlocked iPhones: while the original iPhone was released without a subsidized contract, it was so tied to AT&T that the first strategies for unlocking one for use on another carrier involved soldering the board. Unlocked iPhones were so coveted at the time that George Hotz swapped the second one he made for a Nissan 350Z and three (locked) iPhones.

Anyway.

This is going to seem self-defining, but Nowinski’s analysis is true for any fixed price because that is how inflation works, and central banks have encouraged modest inflation. Everything else is getting more expensive and a dollar has less spending power, but a thousand-dollar iPhone is still a thousand dollars with more money going around. But that has been true for any thousand-dollar product in the U.S. since the iPhone’s launch, save for a few months in 2020 and the fallout from the 2008 housing crash.

What is more curious to me is that this is the only metric by which the flagship iPhone has become less expensive since its 2007 release. According to this analysis, the base price of a flagship model iPhone has increased from an inflation-adjusted $732 for the original model to $999 for the iPhone 15 Pro. And the Pro models are, I think, the true successors of the iPhone lineage — they get the new SoCs, the new cameras, and new industrial designs. The non-Pro models now get last year’s Pro camera systems, last year’s SoC, and — in the case of the iPhone 15 — last year’s special industrial design touch by way of the Dynamic Island.¹ They are a newer expression of the n–1 strategy.

Across the history of each of the product lines, in fact, there are only two instances in which Nowinski’s pricing table shows price decreases:

• The iPhone 5C is grouped with the iPhone SE line and, thus, appears to show a $150 decrease from the 5C to the SE.

  I do not think this is the correct grouping for these models. The simultaneous releases of the iPhone 5C and 5S were more akin to today’s regular and Pro split. The iPhone 5C was an iPhone 5 with a plastic case instead of aluminum, and Apple only shipped the iPhone 5 for one year. The 5C was not the budget line that is the iPhone SE, but it was not the flagship that year either.

• The iPhone XR was $50 more expensive than the iPhone 8 of the previous year, and that was matched by a $50 decrease with the iPhone 11 the following year. But, again, not the flagship.

Though it is possible to find isolated cases of Apple dropping the nominal price of its products — like the second-generation iPod Mini, the iMac G4, and the MacBook Air — it has been fairly rare since the iPhone’s introduction. Instead, it tends to hold price points steady for as long as it can. For example, it has tried to maintain a consumer laptop at the sub-thousand-dollar price point since at least 2002. And, sure enough, this analysis basically holds true for that product, too: today’s 13-inch base model MacBook Air with the M2 chip may cost a hundred dollars more than an iBook G3 did in 2002, but the iBook would today cost an inflation-adjusted $1,700.

What I find more interesting about Nowinski’s analysis is the cost of the Plus-model iPhones. They had an inflation-adjusted cost that was just about a thousand dollars — the same price point that today’s “Pro” iPhones start at. Those were the models which introduced a multi-camera setup to the iPhone line and added new photography capabilities. It proved there are plenty of people who will put up with an enormous iPhone if it has the best camera — which sounds familiar. To be sure, many big iPhones are sold to people who want big iPhones. But I would bet a large number of iPhone 7 Pluses, iPhone 12 Pro Maxes, and — now — iPhone 15 Pro Maxes are sold to people who want the best camera in an iPhone, hands and pockets be damned.