The iPhone 16e settles it: Apple is no longer a luxury company

You’ll often hear people complain that Apple’s “luxury gadgets” are too expensive for them. If they’re talking about a $1,599 iPhone 16 Pro Max or a $2,299 iPad Pro, then this point of view is understandable. But strictly speaking, even the most expensive of Apple’s Pro devices are premium products, not luxury. There’s a big difference.

Want to see a real luxury product? How about an $8,900 Gucci jacket. Or a $10,000 Dior bag. Or a $17,000 Apple Watch. Real luxury is about exclusivity and as much about the number of people who don’t buy your product. But with more than 200 million iPhones sold per year, the luxury niche tag is simply no longer applicable to Apple.

Take the new $599 iPhone 16e. It’s a solid but spartanly equipped smartphone with an older design and only one camera (which doesn’t offer a real optical zoom, no matter how often Apple claims this). The 16e is not a luxury product. It’s part of a growing group of Apple devices that are meant to appeal to a mass market looking for a good-looking product at a decent price. It’s J. Crew, not Cartier.

Of all Apple’s products, only a handful—the iPad Pro, Mac Pro, iPhone 16 Pro Max—can truly be described as premium. In addition to Apple’s brand image and good design, the iPhone Pro and iPad Pro offer exceptional performance and ease of use. And the video professional or app developer who spends big on a Mac Pro can be sure they will get high stability and first-class hardware in return. But it’s hard to find luxury in a product that essentially offers the same experience as one costing thousands less.

Thiago Trevisan/Foundry

Is Apple still a premium manufacturer?

Apple launches more and more affordable products every year. Although these are first-class products, they are aimed more at the mass market and are significantly cheaper than other Apple products.

• The M4 Mac mini is often available for under its $599/£599 MSRP. Even at full price, this is an excellent deal, but despite its many strengths, this is hardly a premium computer.
• The Apple Watch SE isn’t a luxury smartwatch, nor can it even be described as premium compared to the Apple Watch Series 10. But you can pick one up for as little as $199/£189. It’s primarily intended for younger family members who are joining the Apple world at an early age.
• A colorful HomePod mini is available for just $99, $250 less than the classic HomePod. This cute smart speaker has its charms even if audio quality is relatively weak at the bass end.
• The current Apple TV delivers a first-class home cinema experience, voice control, and intuitive remote control for $129.
• AirPods 4 offer AirPods Pro-level sound quality with ANC for $179.
• At $349 (and often on sale), the 10th-gen iPad is clearly targeted at budget buyers. It costs nearly a thousand dollars less than the 13-inch iPad Pro.

Apple had to make a decision years ago. Should it remain a pure premium manufacturer, a kind of Porsche among consumer tech manufacturers, by offering only the best to people willing to pay for it? This would have been risky because it would mean the survival of the company hangs on the success of a very small number of high-priced products. (As an illustration of these risks, mistakes in product development are currently causing the aforementioned German sports car manufacturer serious difficulties.) So Apple chose a different path.

Foundry

Less luxury, more shipments

Apple has evidently decided to become a mass manufacturer offering a wide range of products catering to all income brackets. Premium devices such as the iPhone 16 Pro Max may deliver the biggest profit margin, but less profitable devices such as the iPhone 16e ensure a large number of users. This in turn leads to strong revenue through services such as iCloud+, AppleCare+, Apple Music, Apple Pay, and, last but not least, the App Store. Even growth regions such as India cannot be conquered with premium devices alone.

A broad customer base brings another benefit: economies of scale. The larger the turnover, the higher the number of shipments, the more advantages you gain in areas such as development and marketing. It makes little economic sense to develop your own iPhone CPUs and operating systems for a few customers. But if you sell 230 million smartphones a year, you can negotiate completely different conditions with companies like TSMC.

It’s possible that this strategic shift will have consequences: Apple could find that the premium portion of its brand diminishes in the coming years as people choose value over premium. But I would bet Apple will be just fine with that.