A Super-Expensive iPhone Would Be Good News For Us All

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Write this down, look at it often, memorize it: You don’t have to buy the new iPhone that Apple will announce this fall. You’ll almost certainly want to, because it sounds amazing. Almost no bezel. Crazy new cameras. Facial recognition. Wireless charging. And the ability to turn anything it touches into gold bricks. But that doesn’t mean you have to buy one. Apple almost certainly will offer other very good phones, including important but unexciting updates to the iPhone 7. So you can buy one of those. Or keep the phone you already have.

One thing you definitely shouldn't do is freak out over the price. Apple's next flagship phone will likely run you something like $1,200, which seems absurd given that Apple's best smartphones traditionally start at around $650. Part of the appeal of owning an iPhone, in fact, comes from knowing you, Kim Kardashian, and Tim Cook all carry the same device. But at 12 Benjamins, the iPhone becomes a dream for most people.

You probably don't care that a wildly expensive phone pads Apple's bottom line and reasserts the iPhone's luxury status. But even if you can't or won't spend that much on a smartphone, be happy knowing that some people can and will. That bonkers price tag gives Apple access to technology too rare and too expensive to put into 100 million $650 handsets. And that means Cupertino can innovate again—and once Apple does something, others follow. Before long, all the stuff coming to a phone you can't afford will come to a phone you can.

Anatomy of an iPhone

So why the eye-popping price? Simple: The next iPhone will be more expensive to produce. Start with the screen. It's the most expensive line item on nearly every phone. Apple spends $220 on parts for the iPhone 7, and an estimated $43 of that goes toward the screen. That big, bezel-less panel on the next phone is probably a pricey OLED from Samsung. It's at least 60 percent more expensive than the iPhone 7 screen, says Syl Chao, the CEO of Turing Robotics, a company building a phone with a similar display. Add in facial recognition sensors, wireless charging, and those cameras, and Apple's bill of materials climbs higher than ever.

We've seen smartphone prices change dramatically in recent years. Five years ago, more than half of smartphone buyers spent between $200 and $600 on a handset, according to analysis firm IDC. Today, nearly everyone buys either dirt-cheap or frightfully expensive devices. There's virtually no money to be made on the low end, so the high end becomes ever more competitive. Given the enormous role phones play in our lives, people want more and better features across the board, and happily pay for them. Phones last longer too—if you aren't replacing your handset every year or two, you can spend more when you finally upgrade. "For every iteration, it feels like consumers have higher and higher demands on us," says Carl Pei, cofounder of OnePlus. "If you look at our sales numbers, people seem to understand that good things cost money." Every OnePlus phone has been more expensive—and more popular—than the last.

"If [Apple] says, 'Mobile phones are going to cost $1,200,' then $1,200 it is. For us, it’s good news, because we can ride on the same wave." — Syl Chao, CEO of Turing Robotics

Of course, there's a good chance Apple will artificially inflate the price to keep demand down. Nobody likes waiting months for their new phone, and some reports suggest Apple won't be able to make the device fast enough for everyone to get one quickly. New technology always comes with supply problems; it takes time to gin up the tools and processes to churn out tens of millions of anything. "Either the company that builds the tools ... can't build the tools fast enough for that company to supply Apple, or they don't want to get swallowed by the Apple machine," says Jason Keats, Apple's former lead iPad architect and now Essential's head of product architecture. If you get an order for 100 million iPhones, well, that's your year. A more exclusive phone lets Apple work with technology that's just not available in planet-blanketing quantities yet.

If Apple sells a phone at so elevated a price, the folks in Cupertino will create a new category of super-premium smartphones. I call them fancyphones. It's weird that an ultra-luxe phone market doesn't already exist; it's as if the Toyota Camry were the nicest car on the market. Most people don't buy super high-end stuff, but that's where most of the innovation happens. Even Apple operates this way: The bigger, more expensive iPhones got a second camera before the smaller, cheaper one, and the MacBook Pro got a wacky Touch Bar before the MacBook.

Apple won't be the only company to sell a phone at that price, either. Cupertino traditionally sets the bar for smartphone prices, and more than one competitor tells me that the only way to make buyers consider their device as an iPhone rival is to charge the same price. "If [Apple] says, 'Mobile phones are going to cost $1,200,' then $1,200 it is," Chao says. "For us, it’s good news, because we can ride on the same wave." And with that, Apple's competitors can offer new technologies, techniques, and features without giving their handsets a price that seems outlandish.

You can already see glimmers of what happens when great smartphones don't have to cost $650. Turing's upcoming Appassionato phone ships with an always-on concierge service, something Chao says could never happen with a cheaper device. Red, the high-end camera manufacturer, recently caused a ruckus with its $1,595 Hydrogen One smartphone's titanium body, "holographic display," and ability to interface with Red's cinema cameras. Samsung's Galaxy S8 and S8+ already cost more than the iPhone, and people drop $869 on a Google Pixel XL or $969 on an iPhone 7 Plus with maxed-out storage. Going forward you'll be able to buy phones super-charged for augmented and virtual reality, or featuring IMAX-quality cameras, because manufacturers can finally afford to sell them.

It's worth mentioning, by the way, that iPhone sticker shock might not even last. "The ability to finance over 24 months makes the upfront cost easier to digest," says Anthony Scarsella, research manager at IDC. If $1,200 sounds scary, consider paying just $50 a month for the coolest phone ever. "I also expect a plethora of upgrade and trade-in offers from the carriers, retailers, and even Apple to even further reduce the monthly payments," Scarsella says. iPhones famously hold their value over time, so selling yours to bankroll a new one won't be so hard. Assuming you can get your hands on a new one.

All the iPhone stuff, I should remind you, remains mostly rumor and speculation. But trust me when I say this new class of fancyphones is coming. Does this smartphone stratification mean the end of a beautiful era of universal technology, where everyone had access to the same stuff no matter their budget? Definitely. But fancyphones are good news. They'll bring excitement and innovation back to the smartphone game. Your smartphone won't have to be exactly like my smartphone anymore. And best of all, this year's kickass $1,200 phone looks just like next year's kickass $650 phone.

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