Apple’s new iPhone SE was a predictable upgrade in almost every way but one: for the first time in SE history, Apple raised the price of its cheapest iPhone from $399 to $429. , an increase of $30.
And it’s almost definitely 5G’s fault.
Price increases for 5G phones are common, even for Apple. When the company upgraded from iPhone 11 to iPhone 12, it increased the price of the “standard” model from $699 to $829. But an estimate from Counterpoint Research shows where most of that cost increase is coming from, and it’s not the pricey OLED display: 5G added $34 to the BOM over the 4G-only iPhone 11. . In fact, a report from Fomalhaut Techno Solutions and Nikkei estimates that Qualcomm’s 5G modem was the most expensive component in Apple’s iPhone 12 lineup, contributing about $90 of the roughly $400 it cost Apple. to build an iPhone 12 Pro.
But let’s talk about the $30 figure because that’s the one that keeps coming up. $30 is the extra amount you had to pay for a 5G-equipped iPhone 12 or iPhone 13 if you does not have buy it from the right carriers in the United States. It’s also the price increase from the non-5G iPhone SE at $399 in 2020 to the iPhone SE at $429 in 2022, and it’s estimated to be the premium Apple has to pay to bring 5G on. in these phones. It’s almost as if Apple is just passing on the extra cost of building a 5G phone directly to its customers.
It’s not like Apple has much choice either. When it comes to 5G modems, Qualcomm is one of the only real options, and everyone knows it.
After all, there’s a reason Apple sued Qualcomm over patent charges for the modems it used in its iPhones. And why Apple was willing to swallow its pride and pay over $4 billion in a settlement a few years later. Apple had tried to switch to Intel for modems, but it quickly became clear that Intel was not going to be able to perform as a viable replacement, especially for the 5G modems that Apple needed.
Apple is trying to change that. It paid $1 billion for Intel’s 5G modem business and has spent the past few years preparing to build its own cellular components – modems that could start appearing in new iPhones as early as next year. Unfortunately, these Apple-built modems aren’t ready yet, again leaving the company stuck with Qualcomm’s hardware.
There may be other entirely different reasons why Apple is charging $30 more this year: the current shortage of semiconductors impacting various components or other economic factors, such as rising inflation or supply chain issues, could also impact the price beyond 5G. Or Apple might have just looked at the fact that customers didn’t seem too fazed by the iPhone 12 and iPhone 13’s $30 price increase and realized it could just charge $30 more. also for the SE.
But the facts remain: historically, adding 5G to an iPhone has been a significant cost driver for Apple, and adding 5G is the biggest change between the 2020 and 2022 iPhone SE models.
There’s a possible silver lining here: with Apple looking to move away from Qualcomm’s modems and into its own modems, there’s a chance that Apple might be able to start covering some of the cost of 5G components in its future phones down the line. This could mean that a future version of the iPhone SE could eventually revert to its original price of $399 that Apple has maintained since 2016.
On the other hand, if Apple manages to convince customers to buy a $429 floor for iPhones (with corresponding sales), it’s hard to imagine the company reducing the price in the future. After all, you don’t become a $3 trillion company by leaving money on the table.