Michael Potuck at 9to5Mac lays out a compelling case for why Apple (NASDAQ:AAPL) should include either a 12-watt or 29-watt power adapter in the box with its iPhones. iPhones currently ship with more modest 5W power adapters, which can't charge the devices as quickly as either a 12W or 29W adapter.
While including the more powerful power adapters in the box with future iPhones would certainly enhance the out-of-the-box experience for iPhone owners, here's why I think Apple doesn't currently do it -- and won't do it anytime soon.
Added costs for Apple
While, as Potuck points out, Apple charges the same $19 on its online store for the 5W and 12W adapters, I suspect that the manufacturing costs of the higher-power adapter are simply higher. Including it in the box with the iPhone instead of the 5W adapter would almost certainly increase the costs of the devices by a significant amount.
Even if Apple would incur a raw-materials cost increase of only $3 to $5 by including a 12W adapter in the box in place of the 5W adapter, multiplying that by 200 million units shipped each year would mean a total annual deduction from Apple's gross margin of between $600 million and $1 billion.
The impact wouldn't stop there, though. Raw materials aren't the only costs involved in getting a product from the factory and into a customer's hands. The phones need to be shipped all around the world from the factories in which they are produced, and the inclusion of a 12W power adapter would increase the weight of the box the iPhone ships in.
I know that a slight weight increase might seem trivial, but it would lead to increased shipping costs that gnaw away at Apple's total gross profit and, again, reduce its robust gross profit margin percentage.
This all might not seem like much to Apple, which generated about $60 billion in gross profit during its fiscal 2016, but if there's no need to give up that additional profit, then why do it?
Why not increase pricing?
It may seem that Apple could sidestep this whole issue by simply including the 12W power adapter and slightly increasing its asking price for the phones. But a price increase could lead to lower demand for the device, especially if the increase is for something like a mere accessory.
It may seem counterintuitive, but Apple really is better off selling a slightly cheaper device and then having customers come back to buy the accessory later, particularly as the device purchase represents such a large sunk cost compared with the small additional cost of a nice-to-have accessory.
Also, since many iPhone buyers are repeat buyers, after buying their first iPhones with 12W power adapters, those customers would eventually find themselves with a bunch of expensive power adapters that they don't really have any use for.
Next, even if Apple committed to increasing prices, it'd be tough for Apple to justify that price increase in service of a more expensive accessory when that added bill-of-materials headroom could be used to include features that make the device fundamentally more competitive.
Apple sells premium devices for premium prices, but it must be judicious about both the features that it includes inside the device and the packaging it sells those devices in, to deliver value to shareholders and customers alike.
Though including a 12W power adapter in the box with its iPhones would save some iPhone users from needing to buy adapters separately, the reality is that the charger included in the box is "good enough," and that if customers really value speedier charging, they probably won't view the $19 for a 12W power adapter as that much extra to pay for an accessory that they'll use many times over many years.
Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.