Forget the hype — iPhone Ultra scarcity will tell the story

07/07 10:15 - Forget the hype — iPhone Ultra scarcity will tell the story
Apple has been working on a foldable smartphone for more than a decade. Having spent so much time developing the device, the company doesn’t want to ship something if it can’t make something good. Now, it looks like Apple can make a folding iPhone, but manufacturing them in decent quantities is going to take a little longer to bed in. That’s the basic premise of this weekend’s most interesting slice of Apple-related news, which emerged from analyst Ming-Chi Kuo, who believes initial production of Apple’s folding iPhone — potentially called iPhone Fold or iPhone Ultra — will sell out fast, despite its likely $2,500 price tag.  That’s because he expects Apple will be able to make just 7 million or 8 million units of the device by the end of the year. This relatively low number could reflect previously reported build quality control challenges, which likely have required additional investment in manufacturing capabilities. (That lower number may have changed, since a recent report said Apple has increased initial production to 10 million, and is expected to grab 29% share of the foldable market.) Scarcity by design As with so many iPhones across the near 20-year history of the device, a major new redesign always boosts gray-market sales. The analyst expects we will see this happen again, predicting that scarce supply, recognizable design, and an innovative user experience will help foster a short-term resale premium on second user markets.  To put that into perspective, the analyst predicts initial resale prices for the device could be 50% to 100% above the retail market price, with those elevated prices holding until a supply-demand balance is achieved. Searching for a comparison, the analyst pointed to the iPhone X, which was scarce once it arrived, despite reaching stores two months after the other devices with which it was introduced. Kuo thinks a similarly staggered release might happen with the folding device. He doesn’t think this will dent demand much. It didn’t with iPhone X; despite the cost and late debut, people really fell for the device. It captured over half of all smartphone revenue within weeks, and sold at a rate of one every three seconds in Europe.  Scalp for victory To some extent, we may be able to identify the momentum behind the new device’s launch just by watching its progress on second-user markets after it is introduced. If we can track higher prices for the device, that would imply the scale of unmet demand. Apple will want to stimulate that interest, so much of its work will be to focus on different sectors in which the advanced iPhone can make the biggest difference, perhaps as a field sales tool for executives or a Mac/iPad replacement for business travellers,.  The iPhone X swiftly became the most used smartphone among business users, and Apple’s going to try to press in that direction again. Expect increased marketing activity, innovative additional software features in the run up to the holiday period, and lots of influencers making cute videos in support of the launch.  To an extent, it’s only after the first few months, once demand/supply balance is achieved, that we can gauge success or failure. “The best window for assessing true demand for the foldable iPhone is likely late 2026 to 1Q27,” the analyst said. That’s because by then the holiday shopping season will be done and “early production issues and supply constraints should have improved significantly,” he said. Can Apple reset smartphone pricing? Consider this: The iPhone X was seen as a seriously expensive device once it appeared. It shipped with a then-unheard-of $999 price tag, $350 more than the $649 cost of the iPhone 7.  Apple’s success back then broke the psychological price barrier for smartphones, making it acceptable for buyers to throw $1,000 at a new device. That’s normal today, with US consumers spending more than that each year.  Apple’s decision to fly in a new high-end price point might deliver the same kind of energy, giving Apple access to the most premium consumers even as it pushes into lower-end markets with e-series devices picking up where iPhone 7 left off.  What no one, including Apple or Ming-Chi Kuo, can know yet is whether these specs, iOS 27, and Apple Intelligence will be enough to convince consumers to buy these products. Please join me on social media at BlueSky,  LinkedIn, or Mastodon, even better, please subscribe to The Core for your daily collection of human-curated Apple News. ...