iPhone ASP decline in Q316 shows Apple’s Services strategy at work

On Tuesday, Apple “said the 40 million iPhones it sold in the June quarter brought in an average of $595 each, the lowest number and the largest year-over-year decline in average selling price in two years,” Gregg Keizer reports for Computerworld. “The drop in average selling price, or ASP, was largely credited to the introduction earlier this year of the lower-priced iPhone SE, which sells for $399 and up.”

“The SE’s success came at a cost. Its lower price contributed to a 10% decline in iPhone ASP compared to the same quarter last year,” Keizer reports. “The result: Apple posted a 15% reduction in iPhone unit sales for the June quarter, but a 23% drop in revenue.”

As ” Apple has demonstrated before, and again with the SE, that it’s willing to cut prices if it can see a return elsewhere, argued Ezra Gottheil, an analyst at Technology Business Research. ‘This is constantly Apple’s calculation: A less expensive model means they are going to cannibalize some of the purchases of the higher-priced models, but they are doing it to bring people into the ecosystem,'” Gottheil said,” Keizer reports. “Apple’s not expanding the base just for bragging rights, but to drive the revenue category it calls ‘Services,’ the catch-all that includes iTunes, the App Store, AppleCare, iCloud and Apple Pay. ‘That’s always been the plan,’ contended Gottheil, of the SE strategy.”

Read more in the full article here.

MacDailyNews Take: More bad news for Android. 🙂

We believe that the iPhone SE is doing exactly what it was intended, which is we are seeing a higher rate of new-to-iPhone customers, which is obviously very important to us because we bring new people into the iOS ecosystem. – Apple CFO Luca Maestri, July 26, 2016

3 Comments

  1. I purchased iPhone SE because I didn’t want a phablet. I replaced my 4s because I was already in the Apple “ecosystem”. The vast majority of iPhone SE owners that I know are just like me. The author’s hypothesis that iPhone SE owners are new to the Apple “ecosystem”, I’m my experience, is false. I do agree that a 23% decrease in iPhone revenue is a disturbing trend.

  2. The iPhone SE will likely mark a trend to a lower ASP as Apple move to squeeze the competition to the lower margin part of the business. So the SE serves 2 purposes: provide a 4inch phone for those who want one and a lower cost alternative to the flagship models.
    Also note that Apple saw good growth in India where the burgeoning middle class there are beginning to buy into the Apple ecosystem.
    The growing services are will likely grow significantly in the next few years. This is important because the market needed something new. Now they have realized that services are becoming a meaning source of revenue. I, myself, would like to know the margins of that area since it may be lower that products if Apple have to pay significant amounts to distributers and content owners plus pay for the infrastructure costs.

  3. ASP is a false metric. Two measures are needed. Is each sale profitable? How many sales?

    Apple is going to edge down the mobile phone food chain, encroaching on lower and lower price points. The ASP will decline, but who cares, if the first measure is Yes and the second is positive.

    Apple already sells an iPod Touch for $200 that’s just a hair away from being a mobile phone. They’ll go there, probably soon.

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