Wednesday, September 12, 2012

Economics of the new iPhone

Today Apple announced the new iPhone 5.  The key features appear to be (1) the phone is thinner and lighter, (2) the display has a much higher resolution, (3) faster performance, (4) a smaller connector and (5) enhanced camera performance, including a tool for shooting panoramic photos.  All of this for $199! 

Sales are expected to be strong, so strong that GDP could get a significant boost in the 4th quarter.  WSJ reports that an economist at J.P. Morgan Chase estimates the phone will add 0.25 to 0.5 percent to economic growth.  That's 8 million phones times $400 value added ($600 price minus $200 imported components). 

Wireless carriers sell the phones at $200 but lock in customers with two year contracts that more than make up the $400 discount.  They have reacted, WSJ reports, by adding upgrade fees and more expensive data plans. 

I am still using a three-year-old iPhone 3, so I think I will be ready for an upgrade.  Will have to think awhile about the best carrier and data plan. 

No comments:

Post a Comment