The tech leader has not made any big changes to its signature phone. Will that hurt sales?
September 21, 2021
Apple (NASDAQ: AAPL) showed off the new iPhone 13 lineup earlier this month and it’s more of an incremental improvement than a major tech revolution. The new phones, which come in a variety of configurations, offer a larger battery and better cameras, but there’s no big leap forward.
That was expected as Apple usually has a two-year cycle where the first year features big changes and the second has more incremental improvements. Still, many expected the new iPhones to have added health features and/or satellite capability and neither was announced for the phone’s launch (though that does not mean that one or both features can’t be added later).
Apple did keep the pricing of the phone at the same price points as the previous model. The iPhone 13 Pro starts at $999 and the Pro Max starts at $1,099. The company has also added an option for 1TB of storage.
Matt Cochrane, Maxx Chatsko, Simon Erickson, and Steve Symington joined Dan Kline on the Sept. 17 edition of “7investing Now” to share their reactions to Apple’s event, which also included a new watch model and some revised iPads. The team also breaks down whether consumers should believe Apple when it comes to promises of better battery life since the company seems to make that claim every year, and, we looked at whether these new phones will help the company keep up its recent string of record earnings.
A full transcript follows the story.
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Dan Kline: We’re going to talk about the new iPhone. So Apple (NASDAQ: AAPL) came out with the iPhone 13, there were a lot of questions whether they were going to go with like the X3, or just skip to 14, I like the boldness of Apple realizing how silly it is when a building goes from 12 to 14. So if you’re on 14, you’re not dumb, you know, you’re on 13. So this is the iPhone 13. And it’s coming out in a variety of versions out there’s a mini, there’s a pro, there’s a max, here are the big differences.
And I’m underwhelmed, but I as I said earlier, I’ve been trying to order it all day. It is a new battery. It’s a physically bigger battery. And they’re saying an hour and a half of extra battery life. I’m wary of that. Because Steve, do you ever remember an Apple press event where they didn’t say an extra hour and a half of battery life? yet? We’ve never actually experienced an extra hour and a half of battery life?
Steve Symington 23:48 No, no, it’s no. And it’s funny, because I would have been more intrigued had they said, you know, this isn’t just a physically larger battery, but it’s a more efficient battery that’s the same size and gives you an hour and a half more. So many of these things seem like just kind of modest incremental improvements. I think we get kind of a collective shrug. But the one thing that maybe throws a wrench in that shrug and maybe does spur some sales of the these devices are the deals that people are getting from the carriers for like trade-ins. I think that’s a function of the fact that this is kind of a modest incremental upgrade. So that might make an interesting, but the battery thing is –
Dan Kline 24:32 I’ve heard a lot of people refer to this as d 12SE. Karen, I promise if you stick around, we will get to your question. Matt, you’re you’re a fan here. And I’ll actually get curious to hear Maxx’s opinion too. But let’s get to Matt first. Did anything excite you here? Like, is there a part of you that wants to run out and get this?
Matt Cochrane 24:50 No, I’m actually I’m actually not an Apple fan. Like I have an Android phone. I’m not familiar with the OS ecosystem. My kids love it. My kids are iPhone users. But like, No, I’m not actually, I don’t have too much to add here.
Dan Kline 25:04 So the pricing has stayed the same. And they’ve actually upped the minimum memory. There’s no more 64 gigabyte version of this. Simon, I’m actually surprised that they didn’t raise prices? Because is, is this Apple admitting that maybe there’s a ceiling on prices? Cuz I don’t think there is I’m not sure the difference between 1100 and 1300 matters all that much, especially when while they don’t call it a contract, everybody is buying this on an installment plan, or the vast majority of people are buying this on an installment plan.
Simon Erickson 25:33 So true, Dan. I mean, like, if you look at it, you know, so we see the consumer side of it, right? It’s like, what’s the price point that we pay for the most cutting edge iPhone, but behind the scenes, there’s a lot going on in the semiconductor industry right now, Apple wants to have the most cutting edge chips in its phones that can handle the most processes and applications so that we’ve got 17 apps open, you can handle all of them at the same time, in addition to the radios and the sell signal and everything else like that.
But behind the scenes, chip prices are going up significantly, and Apple is definitely going to be experiencing those. We see a semiconductor supply shortage. And a lot of the manufacturers of chips are increasing prices right now. And Apple even as large as Apple is not going to be immune from those. So it’s curious, Dan, to your point to see if they’re not rate increasing prices, Apple’s eating those margins and just saying, Hey, we might be tapped out and how much we can charge people for the iPhone.
Dan Kline 26:22 It’s also important that the goal of Apple and they’ve always made money on hardware, but their focus on services in recent years has grown exponentially and their service sector has grown by double digits. I think it’s for four or five quarters in a row. I didn’t didn’t quite look that up. Maxx, let me throw this out to you. Because I am pretty sure you are using a cricket or some form of like phone like you might even have a rotary dial on your phone. I’m pretty sure you’re not an early adopter, what does it take to get you to get a new phone? And are you like when you look at something like this? Are you excited about it? Or is it just very ho hum?
Maxx Chatsko 26:57 Yeah, I use smoke signals to text all my friends. It works pretty well. There’s some delay, you know, but now I I’m actually like, man, I use an Android phone, I was actually thinking about switching to the iPhone, because I’m very pro-privacy. And then they came up with a decision recently I only deleted but where there might be scanning phones for different information. Obviously, that doesn’t affect me. But that’s a little bit too much for me. So privacy was something that was enough to overcome the switching costs for me to maybe try out a different ecosystem.
But after that decision, I’m just gonna stick with my Google Android phone, I do use the budget phones, I refuse to pay hundreds of dollars or like $1,000 for a new phone, I run my phone to the ground. I don’t really use my phone very much. I don’t have any things on there. No games, or I don’t have social media on my phone. So I kind of use it like a phone. I know that’s weird for a millennial. That’s how I approach it.
Dan Kline 27:50 I use my phone like a pocket computer. I wanted to get West Ben’s comment in it. And then we’re gonna go to one final comment from the team before we move on topics here. So JT, if you could bring up West Ben’s comment, 7Investing I’m an Apple fan, but I’m still an iPhone eight, because it already is a very powerful smartphone for most applications. And it still works perfectly. Yeah, I’ll talk about it. I’m generally a pretty frugal guy, but I upgrade my phone every year.
And I either return the old one. So it’s not actually as expensive as it seems. Or I cycle it down to the rest of the family. So my son had the original iPhone SE. And he got like my iPhone 10 like so there are ways to do this. And I agree the iPhone 8 is an incredibly powerful phone. I mean, you know, we all remember maybe not Maxx as much but we all remember when like your phone was barely even a phone like it wasn’t great at calling and text messaging wasn’t a thing. And I remember my dad had like a phone in like a briefcase that only worked in like three places.
So this world has gone very, very quickly. I write stories on my phone. I watch movies on my phone. And you know, Maxx, you mentioned you don’t play games, I play backgammon and Solitaire. And I know that ages me but you know, like, I’m not playing like Call of Duty on my phone, though I suppose you could. So again, this is it’s a pretty ho-hum product announcement from Apple that the phones, an incremental upgrade.
The new iWatch has a bigger screen, but it doesn’t have any groundbreaking technology. And I think Maxx has actually explained the reason for that that it is not simple to go from something like I can tell your heart rate, which is just interesting and not necessarily that useful to I’m giving you your blood pressure that makes it a medical device. And that is a layer of regulation that I’m guessing this apple watch can do that. But there is a level that they have to get to to be able to practically do that. Matt, anybody else have any thoughts they want to weigh in here on the iPhone before we move on to our final topic?
Simon Erickson 29:46 I mean, just something interesting is kind of what are you paying for in your phone? Right? This is something that Steve and I and several others on the team look at the most important or not the most important necessarily, but the most expensive components of high-end phones and that goes not just for Apple but for Samsung and everything else.
A lot of it is for the cellular radios so you can connect to 4G, 5G, whatever you’re connecting for. The screens themselves are now using organic light-emitting diodes, OLED screens are very expensive. And there’s a handful of other components that the majority of the cost of these phones. And so it’s kind of interesting when you see the announcements about, you know, what’s, what’s the most, the sexiest thing in the industry and cell phones, oh, it’s 5G, it’s because there’s a lot of money that’s kind of going into those things.
It’s just kind of interesting as an investor to see for the form factor that we all have embraced mobile devices are everywhere now, who’s actually making the margins and can keep those margins for the big manufacturers like Apple and Samsung.
Dan Kline 30:40 And we’re also seeing 5G being sort of a, an increasingly strong benefit. So when I got the latest iPhone, latest for another two weeks, but when I got it, there was 5g in one parking lot here in West Palm Beach. And to test it, I drove to that parking lot and like watch Netflix (NASDAQ: NFLX), and it was amazing. But it wasn’t practical to every time I want to watch a movie on my phone, drive to the Publix parking lot like that’s inefficient.
So now more and more places. I’m seeing 5G. And I don’t mean the sort of pretend 5g. I mean, the meaningful, you’re actually faster 5G we’ve got a comment here from Gregory Spira. That I will let Steve weigh in on. And he says, If you missed the subscriber call that is the call we did earlier today, just for members, when will it be posted on the site? Steve, you know the answer to that, so I’ll throw it to you.
Steve Symington 31:29 And for anyone who is unfamiliar, our subscriber calls are always held on the third Friday of every month, which is today. And we post the recordings to the site the Friday after on the video section of our research page. Or the Monday after rather. So Monday, we’ll have it we just have to get the transcript and recording and all that stuff process. So yes, it’ll be there Monday.
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