Apple (NASDAQ:AAPL) has been very successful in growing iPhone revenue over the course of the company's fiscal year 2018 thanks to significant growth in average selling prices. It certainly helped that Apple's iPhone X -- a device that started at $999 -- proved to be quite popular.
It would seem that with the launch of the latest versions of its iPad Pro tablets, Apple took a simple step that could potentially boost iPad average selling prices over the course of this product cycle.
Let's see what Apple did.
Adding another storage tier
Apple's previous iPad Pro tablets came in 64GB, 256GB, and 512GB storage configurations. The company's latest models come in those same configurations, but with 1TB (that's 1,024GB) versions layered on top.
Those devices don't come cheap. The new 11-inch and 12.9-inch iPad Pros with 1TB of storage cost $1,549 and $1,749, respectively, when configured with only Wi-Fi -- $400 more than their counterparts with 512GB of storage. Those prices go all the way up to $1,699 and $1,899 for the versions with cellular connectivity.
It's hard to estimate just what percentage of new iPad Pro buyers will choose the 1TB versions, but that percentage won't be zero. Since Apple simply didn't sell iPads with 1TB of storage during its previous product cycle, any sales of the 1TB models would have a positive year-over-year impact on average selling prices and, ultimately, overall iPad revenue.
Since larger storage capacities represent a relatively easy way to boost average selling prices, Apple's job will be to make an increasing number of iPad Pro buyers value increased storage space enough to be willing to pay for higher-capacity models.
Additional boosters to iPad average selling prices
Although the addition of the higher storage tier should help improve iPad average selling prices, there are other aspects of the latest iPad Pro product line that could do the same.
For instance, in the last product generation, the 10.5-inch iPad Pro had fairly slim side bezels, while the 12.9-inch model had very large side bezels, giving it a disproportionately larger physical footprint compared with the 10.5-inch model. The 12.9-inch model may have been viewed as unwieldy compared to last year's 10.5-inch model, which could have pushed some prospective buyers toward the smaller -- and cheaper -- tablet.
In the new product lineup, though, the 12.9-inch iPad Pro has a dramatically-reduced overall size compared with its predecessor, even though it has the same screen size. I wouldn't be surprised to see some iPad buyers who would have picked the 10.5-inch model in the previous generation opt for the 12.9-inch version in this generation as a result.
To the extent that buyers become more likely to choose the 12.9-inch iPad Pro over its 11-inch counterpart (and, of course, assuming identical storage configurations), average selling prices could rise.
Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and is long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.