Apple’s quarterly results are up, and the one thing that many of the financial big brains are paying attention to is the average selling price of the iPhone: It currently sits at around $580, compared to $613 last quarter, which is a big change sequentially. There’s a couple of reasons that could be happening, and they aren’t necessarily bad for Apple.
AT&T introduced some considerably aggressive pricing promotions this past quarter, including giving away free iPhone 5 devices with iPhone 4S trade-ins. AT&T said on its earnings call that it sold more iPhones this quarter than in the year ago quarter, even though it isn’t revealing exactly how many it sold. That likely means it did very well, which means it may have given away a lot of free iPhones. Recall also that T-Mobile introduced the iPhone 5 this past quarter, and that it initially began selling the iPhone at a reduced price compared to its competitors (though it isn’t clear who was absorbing the loss).
This could also be a strong indication that Apple is selling a lot of older devices, like the iPhone 4 and iPhone 4S, which are still available. Apple charges considerably less for these, and ASP on those are often lower, too. Walmart discounts on iPhone also began in late June, on iPhone 5 and iPhone 4S models, which would also result in lower ASP.
So why would that be good for Apple? 31 million iPhones is one very good reason. Apple increases its market share by pushing ASP lower, which is a long-term boon for the platform and for its overall device sales, since the company finds a halo effect for iPhone owners who tend to buy other Apple kit. And lower ASP could mean it’s making bigger inroads into new and emerging markets, which is also a long-term benefit for the company. Should it introduce iPhone models that are lower cost and cheaper to produce in the fall, that market could open up further, too.
Still, Apple said on its earnings call that “iPhone 5 remains by far the most popular iPhone,” but also noted that they “were also very happy with our sales of iPhone 4 and 4S.” So promotions, more than older devices, may have been a bigger part of the ASP change.