Apple released the iPhone XR in October. It was billed as the cheaper alternative to the XS and Max, scaling down on the screen and second back camera to make it an “affordable” alternative.
The problem is, nobody wants them – or at least not as many people as Apple projected (interestingly, somebody confirmed to Reuters that the XR has been the best-selling model since it went for sale in October. But still, not as much demand as expected).
Now, Apple is scaling down iPhone XR production, while scaling up iPhone X (last year’s flagship model) production.
That means there might be a giant stockpile of XRs sitting around. Basic economics says the price should fall so demand matches supply. However, Apple isn’t known to cut prices until the next year’s model comes out.
However, while the price remains $749, Apple has put in a few backdoor ways to cut the price.
First, in Japan, cutting the effective price by $100 through carrier contracts (9to5Mac).
Second, 9to5Mac pointed out that Apple is increasing its trade-in value
In the past, they have relied on carrier incentives, rather than outright price cuts, to clear out inventory (The Verge in 2014: Apple drops iPhone 5S price to $99, makes iPhone 5C its free option).
With this new trade-in promotion, not everyone can take advantage. If you have anything older than a 6, you’re out of luck, and you’re paying full sticker price. But if you have a new-ish phone, Apple is going to give you a nice chunk of money to upgrade.
Apple’s backdoor iPhone upgrade
While it remains to be seen whether this big recycling promo is a one-time thing or a test for a longer-term program, it is big shift for Apple – and it might be a sneaky way to speed up the upgrade cycle moving forward.
Read also: QUICK REVIEW: Last week’s Apple Q4 earnings
Apple is in the middle of a big shift in its business. The company isn’t reporting handset volumes anymore for a variety of reasons. One is that the upgrade cycle is getting longer and longer. That means the company has to rely less on outright iPhone sales, and lean more into services and recurring revenues from Music, apps, and all that other stuff you get billed for every month. Basically, it doesn’t matter how many iPhones it sells anymore, just how much money the company is making (or at least, it wants to train investors to think this way).
However, offering bigger “recycling” discounts for new-ish models might be a great way for the company to nudge iPhone users into buying new models. If you have a phone that is less than 3 years old, you get a big discount. If you wait longer to upgrade, you’re going to pay a lot more out of pocket. That’s sort of brilliant.