In early September, Apple (AAPL 0.30%) announced several new products, including multiple new iPhone models and a new Apple Watch. For the most part, product releases were in line with expectations. But the tech giant did surprise investors on one front: the price of its iPhone 11. The new iPhone was priced lower than last year's entry-level iPhone -- the iPhone XR.
This year's entry-level iPhone's lower price tag may be enough to prompt many Apple customers to upgrade from an aging device.
It was certainly enough for me. I bought my first iPhone in three years last week.
Getting aggressive on price
Apple launched three new iPhones earlier this month. Its flagship models include the iPhone 11 Pro and iPhone 11 Pro Max, starting at $999 and $1,099, respectively. These two phones, with their 5.8-inch and 6.5-inch displays, are priced the same as Apple's iPhone XS and XS Max were priced last year. Of course, they've been upgraded with an improved processor, a much better camera system, and more.
For Apple's new iPhone 11, however, the tech company priced the smartphone at $699 -- $50 less than iPhone XR's $749 price tag last year. This is a notable move considering that the phone boasts the same A13 Bionic processor that's in the iPhone 11 Pro and iPhone 11 Pro Max, and it has the same 6.1-inch display size as the iPhone XR. In addition, the iPhone 11's camera system is a significant step up from the iPhone XR's.
With this aggressive pricing and the $200 trade-in value Apple assigned my aging iPhone 7 Plus, this new smartphone set me back only $499 (before taxes) -- still a meaningful sum, but less than I would have had to spend last year for the iPhone XR. In addition, it's far below the iPhone 11 Pro price.
Notably, Apple took its aggressive pricing even further this year by dropping the price of its iPhone XR by $150 to $599. This is a bigger price cut than Apple's typical $100 price decreases on old iPhone models when new models launch. So buyers who want to spend even less money can now get their hands on a one-year-old iPhone for just $599.
Are lower prices enough?
While slightly more aggressive pricing on Apple's entry-level iPhone this year may have been enough to get me to finally upgrade my iPhone, it's not clear yet whether the company's latest iPhone lineup is compelling enough to help the tech giant's important smartphone segment return to growth.
iPhone revenue was down 12% year over year in Apple's most recent quarter. Even if the company hit the nail on the head with the lower price for its newest entry-level iPhone, this still doesn't guarantee the company's iPhone business can return to revenue growth.
To get an idea of how the newest iPhones are resonating with consumers, investors should look for commentary from Apple management in the company's fiscal fourth-quarter earnings call on the latest iPhone sales trends.